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otherwise. Under section 165(c), losses of individuals are
limited to (1) losses incurred in a trade or business, (2) losses
incurred in any transaction entered into for profit, though not
connected with a trade or business, and (3) losses of property
not connected with a trade or business or a transaction entered
into for profit, if such losses arise from fire, storm,
shipwreck, or other casualty, or from theft. Section 165(e)
provides that any loss arising from theft will be treated under
section 165(a) as sustained during the taxable year in which the
taxpayer discovers the loss.
Whether a loss constitutes a theft loss is determined by
examining the law of the State where the alleged theft occurred.
Bellis v. Commissioner, 540 F.2d 448, 449 (9th Cir. 1976), affg.
61 T.C. 354 (1973); Edwards v. Bromberg, 232 F.2d 107, 111 (5th
Cir. 1956); Viehweg v. Commissioner, 90 T.C. 1248, 1253 (1988).
Section 484(a) of the California Penal Code (West Supp. 2004)
defines theft as follows:
Every person who shall feloniously steal, take, carry,
lead, or drive away the personal property of another,
or who shall fraudulently appropriate property which
has been entrusted to him or her, or who shall
knowingly and designedly, by any false or fraudulent
representation or pretense, defraud any other person of
money, labor or real or personal property * * * is
guilty of theft. * * *
To support a finding of theft by false pretense in California,
section 484(a) of the California Penal Code requires intent on
the part of the defrauder to obtain for himself the victim’s
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