No Theft Loss Or Bad Debt Deduction Allowed For Unwise Investment Made By Taxpayers

No Theft Loss or Bad Debt Deduction Allowed for Unwise Investment made by Taxpayers. Delbert Bunch was a broker, and his wife Ernestine Bunch a consultant. At that time the petition was filed, Delbert and Ernestine resided in Las Vegas, Nevada.S.A. Commercial Mortgage Co. (Mortgage Co.), that was going by Joseph Milanowski. Mortgage Co. raised money from traders and made loans to real estate developers.

4,044,096 in trade for an email. Per year These were to be paid 20 percent interest, the calendar year following the last interest payment with the principal credited one. 11,385,662 against Mortgage Co. in order to verify their losses and apply for tax refunds. 500,000 of their loss, and sometime after 2009 they received at least one distribution from Mortgage Co. In 2009 2009, the few submitted an amended 2006 tax return and changed the bad debt deduction to a theft loss deduction.74,236 for Delbert and Ernestine’s 2006 tax return. OBSERVATION: In bankruptcy proceedings, lenders are paid to be able of priority. In general, guaranteed creditors first are paid, with any staying money distributed equally to unsecured creditors.

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Code Sec. 165(a) permits a deduction against normal income for any loss sustained through the tax year and not compensated for by insurance or otherwise. The primary issues for the court were (1) whether Delbert and Ernestine could state a bad debt deduction for the 2006 taxes calendar year and if not, (2) if they could declare a theft reduction.

Delbert and Ernestine attempted to establish their loss by filing a proof of claim in Mortgage Co.’s bankruptcy proceeding. The courtroom held that Delbert and Ernestine were not allowed a bad debt or theft reduction deduction for 2006 because they had not proved there is no reasonable prospect of recovery as of the end of the 2006 tax year. The courtroom found that, because the couple were traders in Home loan Co simply., their debt was a nonbusiness debt. Subsequently, the court found that there was an acceptable potential customer of recovery because the couple had secured a place in the order of distribution from the personal bankruptcy estate by submitting their proof of claim.

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