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Bank immediately demanded full payment of the loan balance. In
response, AHERF issued a check for $1,516,170.97 from
petitioner’s KEYSOP account to repay the balance of the loan (in
addition to using funds from the cashed-out insurance policies).
AHERF’s check required signatures by both petitioner and PNC Bank
in order to be cashed. Although it was perhaps not as petitioner
would have liked, AHERF did issue payment from his KEYSOP account
to discharge petitioner’s debt, conferring a benefit on
petitioner. Thus, AHERF did not make a conversion of
petitioner’s funds, a requirement to claim a theft loss
deduction. See Sperzel v. Commissioner, 52 T.C. 320, 328 (1969)
(“But the word ‘theft’ extends only to the ‘criminal
appropriation of another's property to the use of the taker.’”
quoting Edwards v. Bromburg, 232 F.2d 107, 110 (5th Cir. 1956)).
AHERF also structured employee KEYSOP accounts so that it
had the right to reclaim any funds in the accounts in event of
bankruptcy or insolvency. AHERF filed a petition for bankruptcy
under chapter 11 and reclaimed petitioner’s remaining KEYSOP
funds 1 month after petitioner’s termination. Petitioner
acknowledged and stipulated he knew of AHERF’s rights to reclaim
the funds and may not therefore claim a theft loss on those
funds. We hold that petitioner has failed to prove theft of
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