- 62 - Petitioners cite: (1) Nichols v. Commissioner, 43 T.C. 842 (1965), for the general proposition that the “partnerships are entitled to a theft loss deduction” because a “promoter’s fraud in obtaining money from investors in a tax shelter constitutes theft under Section 165”; (2) Cummin v. United States, 73 AFTR 2d 2092 (D.N.J. 1994), for the propositions that (a) “the partnerships are entitled to a business theft loss” where the partnerships’ transactions lack “economic substance by reason of fraud”, and (b) “the Tax Court has contemplated there will be circumstances where a partner’s out-of-pocket loss in a tax shelter is deductible as a theft loss”; and (3) Girgis v. Commissioner, T.C. Memo. 1987-556, affd. in part, revd. in part, and remanded 888 F.2d 1386 (4th Cir. 1989), and Harrell v. Commissioner, T.C. Memo. 1978-211, for the proposition that if it is proven that “the money invested by a partner in a partnership is lost to another partner’s theft of the same, the partnership has incurred a loss.” Petitioners’ reliance on Nichols v. Commissioner, supra, is misplaced. Nichols is distinguishable from the instant cases and is not persuasive in establishing that a theft loss occurred at the partnership level. The taxpayers in Nichols were individuals who invested in a tax shelter and proved that the promoter of the investment did not execute the transactions for which the investors bargained.Page: Previous 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 Next
Last modified: May 25, 2011