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during the taxable year and not compensated for by insurance or
otherwise, including losses arising from theft. Sec. 165(c)(3).
Petitioner has the burden of showing that a theft loss occurred.
Rule 142(a). A deduction for a theft loss can be sustained only
if a theft occurred under the applicable State law. Paine v.
Commissioner, 63 T.C. 736, 740 (1975), affd. without published
opinion 523 F.2d 1053 (5th Cir. 1975).
Petitioner did not introduce sufficient evidence at trial to
establish that there was an embezzlement from the law firm, what
the amount of the alleged embezzlement was, or precisely when the
embezzlement occurred or was discovered. Petitioner has failed
to establish that she is entitled to a theft loss for any of the
years in issue. See, e.g., Marr v. Commissioner, T.C. Memo.
1995-250.
E. Conclusion
Accordingly, we sustain respondent’s deficiency
determination.
II. Fraud
The addition to tax and penalty in the case of fraud is a
civil sanction provided primarily as a safeguard for the
protection of the revenue and to reimburse the Government for the
heavy expense of investigation and the loss resulting from a
taxpayer’s fraud. Helvering v. Mitchell, 303 U.S. 391, 401
(1938). Fraud is intentional wrongdoing on the part of the
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