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the separate property of Ms. Smith on behalf of the corporation
or the corporation ratified the designation.11 See Safety Intl.,
Inc. v. Dyer, 775 F.2d 660, 662 (5th Cir. 1985). Consequently,
we conclude that petitioners have failed to show that Ms. Smith
did not receive the corporation’s effective consent with respect
to the diamond ring and have failed to prove that a theft of the
ring occurred. Accordingly, we hold that petitioners are not
entitled to deduct a loss in 2000 with respect to the alleged
theft of the diamond ring.
Alleged Failure of Ms. Smith to Assume Obligation for Liens on
the Southampton Property
Respondent contends that petitioners are not entitled to
deduct a loss related to the alleged failure of Ms. Smith to
assume the obligation for liens on the Southampton property
because no related liability existed between petitioner and Ms.
Smith. Petitioners contend that Ms. Smith’s failure to assume
the obligation for liens on the Southampton property constituted
a theft and/or a bad debt and that petitioners are entitled to a
deduction.12
11The parties stipulated that petitioner was the sole
shareholder of the corporation.
12Petitioners do not specify whether the claimed deduction
constitutes a sec. 165 theft loss deduction or a sec. 166 bad
debt deduction.
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