Thus Tax Court rejects the proposed installment agreement of Oscar C. and Aranka M. Hawaii, 2011 T.C. Mem. 134, filed 6/15/11.

Oscar wanted a Section 6159(a) streamlined installment agreement, and claimed his tax balance due was under $25,000 (thus entitling him to a streamline). IRS said no, disallowing a $100,000 theft loss Oscar claimed, based on his purchase of some stock that he claims was a fraud. Oscar took one-third of his retirement portfolio, and gave it to a fellow parishioner who was promoting a corporation called ProCore Group, Inc.

Apparently the only business ProCore had was grabbing money, according to Oscar. Oscar had to hire counsel and threaten suit to get his stock certificates. The certificate showed he owned 3,333,333 restricted and unregistered shares in the company. Oscar spent the next four years trying to recover his investment, hiring counsel and complaining to State governmental authorities. Nothing happened.

Tax Court denies Oscar’s theft loss. Oscar claims Section 165(a) casualty loss for theft. But when was there a loss, if any? Judge Ruwe states the rule:  “Generally, a theft loss is treated as sustained during the taxable year in which the taxpayer discovers it. Sec. 165(a), (e). However, even after a theft loss is discovered, if a claim for reimbursement exists during the year of the loss with respect to which there is a reasonable prospect of recovery, then a theft loss is treated as “sustained” only when it can be ascertained with reasonable certainty whether such reimbursement for the loss will be obtained.” 2011 T.C. Mem. 134, at p. 9.

State law determines what is theft. Taxpayers need only prove by a preponderance of evidence that the loss was in fact caused by theft. A criminal conviction is not necessary. But Oscar produced no evidence to show that, under the relevant State law (Ohio, in Oscar’s case), there was in fact a theft loss, or even that his ProCore stock was worthless.

Judge Ruwe said: “At trial petitioner implied throughout his testimony that his investment was stolen but provided no specific evidence in support of that conclusion. The record indicates that petitioners made a $100,000 payment for an investment in ProCore, in exchange for which they received 3,333,333 shares of stock in the company.[Footnote omitted.] There is no evidence that the 3,333,333 shares of stock ProCore issued are not valid and legitimate shares of stock. Petitioner testified that the shares had been accepted by Charles Schwab and that he was never notified that the shares were in any way irregular or deficient. Petitioners provided no evidence, other than petitioner’s testimony, to establish that the 3,333,333 shares of ProCore stock were valueless in 2005 or that they ever became valueless.” 2011 T.C. Mem. 134, at pp.  11-12.

In short, Oscar may have made a bad deal. Or maybe not. But if he was ripped off, he didn’t prove he wuz robbed.