- 19 -
Alleged Failure of Ms. Smith To File a Proper 1986 Federal Income
Tax Return
Respondent contends that petitioners are not entitled to
deduct a loss with respect to the alleged failure of Ms. Smith to
file a proper 1986 Federal income tax return because no related
liability existed between Ms. Smith and petitioner. Petitioners
contend that Ms. Smith and petitioner agreed pursuant to the
divorce agreement to file separate 1986 Federal income tax
returns, that Ms. Smith failed to file a proper 1986 Federal
income tax return, that petitioner’s return was audited and he
was required to pay Ms. Smith’s 1986 tax liability of $118,000,15
that Ms. Smith’s failure to file a proper 1986 Federal income tax
return constitutes “theft by swindling and false pretenses”, and
that petitioners are entitled to deduct the $118,000 as a bad
debt loss and/or as a theft loss.16
Petitioners have failed to demonstrate that they are
entitled to a section 165 theft loss deduction related to the
alleged failure of Ms. Smith to file a proper 1986 Federal income
15Petitioners contend that their accountant determined that
Ms. Smith’s alleged failure to file a proper 1986 Federal income
tax return resulted in expenses to petitioner of $118,000 “after
allowing her all credits for community splitting.”
16Petitioners do not specify whether the claimed deduction
constitutes a sec. 165 theft loss deduction or a sec. 166 bad
debt deduction.
Page: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 NextLast modified: May 25, 2011