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Generally, a taxpayer is not entitled to a loss deduction
solely on the account of a decline in the value of stock unless
the stock is worthless and has no recognizable value or until the
stock is sold. Sec. 165(g); sec. 1.165-4(a), Income Tax Regs.
Section 165(e), however, provides that any loss arising from
theft will be treated under section 165(a) as sustained during
the taxable year in which the taxpayer discovers the loss.
Whether a loss constitutes a theft loss is determined by
examining the law of the State where the alleged theft occurred.
Bellis v. Commissioner, 540 F.2d 448, 449 (9th Cir. 1976), affg.
61 T.C. 354 (1973); Edwards v. Bromberg, 232 F.2d 107, 111 (5th
Cir. 1956); Viehweg v. Commissioner, 90 T.C. 1248, 1253 (1988).
Section 484(a) of the California Penal Code (West Supp. 2004)
defines theft as follows:
Every person who shall feloniously steal, take, carry,
lead, or drive away the personal property of another,
or who shall fraudulently appropriate property which
has been entrusted to him or her, or who shall
knowingly and designedly, by any false or fraudulent
representation or pretense, defraud any other person of
money, labor or real or personal property * * * is
guilty of theft. * * *
To support a finding of theft by false pretense in California,
section 484(a) of the California Penal Code requires intent on
the part of the defrauder to obtain for himself the victim’s
property. People v. Ashley, 267 P.2d 271, 279 (Cal. 1954);
People v. Fujita, 117 Cal. Rptr. 757, 764 (Ct. App. 1974); People
v. Conlon, 24 Cal. Rptr. 219, 222 (Dist. Ct. App. 1962).
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Last modified: May 25, 2011