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connected with a trade or business, if such losses arise from
theft. Section 165(e) provides that theft losses are treated as
sustained during the taxable year in which the taxpayer discovers
the loss. The amount of a theft loss the taxpayer may deduct, as
limited by section 165(h), is the lesser of the adjusted basis of
the property or its fair market value. Sec. 1.165-8(c), Income
Tax Regs.
Deductions are strictly a matter of legislative grace.
INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New
Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).
Taxpayers must substantiate any deductions claimed. Hradesky v.
Commissioner, 65 T.C. 87, 89 (1975), affd. per curiam 540 F.2d
821 (5th Cir. 1976). Because petitioner did not meet the
substantiation and recordkeeping requirements of section
7491(a)(2), the burden of proof remains on petitioner. Rule
142(a).
In her memorandum, petitioner described her 1980 belongings
as:
1. Clothes - 2 evening dresses at $100/ea. $400
business suits at $80/ea. & others
2. Books - 3-4 yrs. graduate study, books 70,000
with notations, reports, etc. papers for
career and CPA exam - 4 yrs. time & efforts
3. Stamp collection, scholastic records (GRE 500
Tofel, Diplomas), Receipts old coins, etc.
4. Other household items 50
5. Pictures of past memories, souvenirs 10,000
Total $80,950.00
She further described her belongings in part to be “4 years
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Last modified: May 25, 2011