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therefore, was taxable on his distributive share of the
partnership’s profits for 1998, even though he did not receive
it. See First Mechs. Bank v. Commissioner, 91 F.2d at 279. It
is irrelevant that petitioner still may not know the full extent
of the partnership income because of the deposits stolen by his
partner, Mr. Cohen; the nonappearance of the deposits on the
partnership books is not determinative. See Stoumen v.
Commissioner, 208 F.2d 903, 908 (3d Cir. 1953) (holding that the
taxpayer’s distributive share of partnership income was taxable
to him in the year of realization by the partnership, despite the
fact that his partner had embezzled funds which did not appear in
the partnership books, and despite the fact that the taxpayer was
unaware of the existence of the funds and never received any of
them), affg. a Memorandum Opinion of this Court.5
Thirdly, a partner is taxable on his distributive share of
partnership income when realized by the partnership despite a
dispute among the partners as to their respective distributive
shares. In De Cousser v. Commissioner, 16 T.C. 65 (1951), the
taxpayer argued that a controversy with his partner rendered the
amounts of his distributive share indefinite and impossible to
determine and that those amounts were not specifically
5 We recognize that this is a harsh rule, but the harshness
is mitigated somewhat by the theft loss deduction allowed under
sec. 165(e), which, in pertinent part, provides: “any loss
arising from theft shall be treated as sustained during the
taxable year in which the taxpayer discovers such loss.”
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