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partnerships would receive the relief from theft intended by
Congress. The facts in the instant case are clearly
distinguishable from the unique facts in Rod Warren Ink and do
not warrant a departure from the year of discovery requirement
under section 165(e).
(iii) Petitioners’ Year of Discovery Claim
We have decided that equitable estoppel and the holding in
Rod Warren Ink v. Commissioner, supra, have no application in
this case. Thus, petitioners have failed to establish that a
departure from the literal meaning of section 165(e) is warranted
to allow the partnerships to claim theft loss deductions in any
of the years at issue. Accordingly, a theft loss deduction, if
proven, would only be allowed in the year of discovery. See sec.
165(e). Because petitioners admit that the partnerships did not
discover the alleged theft losses until 1997 or 1998, the year of
discovery requirement in section 165(e) precludes a theft loss
deduction in any of the years at issue. See sec. 6226.
c. The Remaining Elements of a Theft Loss
Although failure to prove only one of the elements of a
theft loss prohibits a taxpayer from claiming the deduction,
petitioners have failed to establish two essential elements of a
theft loss deduction. Namely, (1) that the partnerships were
victims of theft and (2) that the year of discovery was a year
before the Court. Since we have held that the partnerships are
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