Bennett Geiger - Page 11

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          with self-serving and incredible testimony.  Because petitioner             
          did not introduce credible evidence with respect to those factual           
          issues, the burden of proof does not shift to respondent under              
          section 7491(a)(1).7  Accordingly, we need not decide whether               
          petitioner has complied with the applicable requirements of                 
          section 7491(a)(2).  The burden of proof rests with petitioner to           
          prove that he qualifies for a theft loss deduction in excess of             
          the amount respondent allowed in the notice of deficiency.                  
               Section 165(a) allows a deduction for “any loss sustained              
          during the taxable year and not compensated for by insurance or             
          otherwise.”  Concerning theft losses, section 165(a) is                     
          applicable for the year “in which the taxpayer discovers such               
          loss.”  Sec. 165(e).  For purposes of section 165(e), theft                 
          includes embezzlement.  Sec. 1.165-8(d), Income Tax Regs.                   
               To carry his burden, petitioner must establish that the                
          alleged theft loss occurred and that the requirements of section            
          165 have been met.  See Allen v. Commissioner, 16 T.C. 163, 166-            
          167 (1951).  Petitioner must establish, inter alia, the existence           
          of a theft within the meaning of section 165 and the amount of              
          the claimed theft loss.  See Elliott v. Commissioner, 40 T.C.               
          304, 311 (1963).  Whether certain actions constitute theft for              

               7We note that, although the burden of proof did not shift,             
          respondent did produce a full source and applications analysis of           
          petitioner’s business and personal income.  The analysis shows no           
          missing funds.                                                              

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