- 9 - 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. If in the year of discovery there is a claim for reimbursement that has a reasonable prospect for recovery, a loss is not considered sustained until the tax year in which it can be ascertained with reasonable certainty. Secs. 1.165-1(d)(3), 1.165-8(a)(2), Income Tax Regs. Petitioner bears the burden of proving a deductible loss, and he must establish the extent and amount of the loss. Citron v. Commissioner, 97 T.C. 200, 207 (1991). We apply the law of the jurisdiction where the loss was sustained to determine whether a theft or embezzlement has occurred. Bellis v. Commissioner, 540 F.2d 448, 449 (9th Cir. 1976), affg. 61 T.C. 354 (1973); Luman v. Commissioner, 79 T.C. 846, 860 (1982). It is unclear where petitioner resided in 2002. As a result, it is also unclear where petitioner may have sustained his claimed theft loss. The record indicates that petitioner formerly resided in Illinois and currently resides in California. We set forth each State’s theft statute.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011