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must prove a theft occurred. Elliott v. Commissioner, 40 T.C.
304, 311 (1963); Davis v. Commissioner, T.C. Memo. 2005-160
(2005). Petitioner claims a theft loss of $2,221,668 on his 2000
tax return relating to the value of employee benefits. This
value stems from (1) a life insurance policy with Pacific Life,
(2) a life insurance policy with Equitable Life, and (3) the
funds in petitioner’s KEYSOP account. Petitioner maintains AHERF
unlawfully converted these funds, resulting in a theft.
We find that petitioner has failed to prove a theft of the
life insurance policies occurred. AHERF was entitled to a right
of corporate recovery on the policies, allowing it to reclaim the
amounts paid in premiums upon the policyholder’s death or
termination. AHERF reclaimed the insurance policy premiums only
after petitioner’s employment was terminated. Further,
petitioner admits that he assigned to AHERF all his rights under
the insurance policies in return for KEYSOP funding.
Essentially, petitioner did not own the policies. Accordingly,
petitioner failed to establish the theft of any value with
respect to the policies.
Petitioner likewise may not claim a theft loss deduction for
his KEYSOP account. At the time of his termination in June 1998,
petitioner’s account had a balance of $2,062,452. Petitioner
also had an outstanding loan from PNC Bank cosigned by AHERF for
approximately $2.2 million. Upon petitioner’s termination, PNC
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