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Section 165(a) provides that there shall be allowed as a
deduction any loss sustained during the taxable year and not
compensated by insurance or otherwise. Section 165(c) limits the
loss deduction for individuals to losses incurred in a trade or
business, losses incurred in a transaction entered into for
profit, and certain other losses including those arising from a
casualty or from theft. Section 165(g)(1) provides that if any
“security” which is a capital asset becomes worthless during the
taxable year, then the resulting loss shall be treated as a loss
from the sale or exchange, on the last day of the taxable year,
of a capital asset. Section 165(g)(2) defines “security” for
purposes of section 165(g) as a share of stock in a corporation;
a right to subscribe for, or to receive, a share of stock in a
corporation; or a bond, debenture, note, or certificate, or other
evidence of indebtedness, issued by a corporation or by a
government or political subdivision thereof, with interest
coupons or in registered form.
Petitioners have failed to prove they held a “security” for
purposes of section 165(g) with respect to Orion, if and when
Orion became “worthless”, and that they suffered a loss related
to Orion during the years in issue. See secs. 1001, 1011, 1012.
4(...continued)
treated as if they had been raised in the pleadings. Rule 41(b).
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Last modified: November 10, 2007