- 6 -
and control over the annuity proceeds, even if her father also
claimed title to the proceeds. See Rutkin v. United States,
supra.
Petitioner nevertheless argues that she is not liable for
tax because of the alleged wrongdoing of Mr. Knight and Mr.
Falcon described in the District Court complaint. Even if
petitioner’s allegations are true, however, petitioner had the
freedom to use the annuity proceeds at will. See Ianniello v.
Commissioner, supra. Accordingly, petitioners must include in
gross income the $53,885 of annuity proceeds and the $1,136 of
interest income.
Although it is not clear, petitioners may be arguing that
they suffered a theft loss. Section 165(a) allows a deduction
for “any loss sustained during the taxable year and not
compensated for by insurance or otherwise.” A loss arising from
theft is treated as sustained during the year in which the
taxpayer discovers such loss. Sec. 165(e). 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. Filing a lawsuit to recover a purported loss gives
rise to an inference that the taxpayer has such a claim. Dawn v.
Page: Previous 1 2 3 4 5 6 7 8 9 10 Next
Last modified: November 10, 2007