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determined for petitioners’ 2001 taxable year. The sole issue
before the Court is whether petitioners are entitled to a theft
loss deduction for the 2001 taxable year.
FINDINGS OF FACT
Some of the facts have been stipulated, and the stipulated
facts and accompanying exhibits are hereby incorporated by
reference into our findings. Petitioners, husband and wife,
resided in Tijeras, New Mexico, when they filed their petition.
In September 1994, petitioners and James Green (Mr. Green)
entered into a preconstruction agreement for the construction of
a new house. Mr. Green hired Max Cabber (Mr. Cabber) to draw
plans and assist in the design of petitioners’ house. On
February 3, 1995, petitioners contracted with Mr. Green for the
construction of a $190,900 house.1 Construction of petitioners’
house was completed on August 4, 1995, and petitioners moved in
that same day.
Sometime thereafter, petitioners began noticing problems
with their new house. Those problems escalated and became a
living nightmare, despite various repair efforts by Mr. Green and
the subcontractors. On May 12, 1999, petitioners filed a civil
lawsuit in the Second Judicial District Court of Bernalillo
County, New Mexico (State court) against Mr. Green and several
1 That contract was later revised as the result of change
orders. The total amount ultimately paid to Mr. Green was
$196,183.
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