In Uncategorized on 10/25/2017 at 16:21

Thus spake Judge Gerber to Paul Peter Partyka and Catherine Elaine Partyka, 2017 T. C. Sum. Op. 79, filed 10/25/17.

Paul Peter and Cath rented their residential property to Ruth Games, and apparently her name was her fame. She robbed Paul Peter but not to pay Paul Peter or Catherine, because her security deposit check bounced.

But wait, there’s more!

She stiffed Paul Peter and Cath for the money she was going to pay them for some of the furniture in the rental property. Then she paid no rent, moved out ahead of the marshal showing up to evict her, and took all the furniture with her.

Paul Peter and Cath recovered some, but their house was damaged when Ruth took off in November.

Paul Peter and Ruth didn’t claim the theft loss until the following year. Though they’d recovered some of the furniture, some was damaged or destroyed, and they thought they had a chance at recovery until the next year, when two lawyers told them to forget it, that Ruth had been playing this game a lot but wasn’t likely to be able to pay any judgment they got even if they caught her.

Paul Peter and Cath had photographed the property as furnished immediately before delivering possession, and again after Ruth had knocked it over. They had some iBay and Etsy numbers for the missing stuff, but their eyeball estimate for the rest didn’t fly.

Judge Gerber finds that, so long as Paul Peter and Cath thought they had a chance of recovery that wasn’t pure fantasy, they should not claim the loss until it was a dead loss, and that was in the year at issue.

It’s the substantiation that hurts Paul Peter and Cath. They claimed $29K. Of that, they had nothing for $6700. For $10,000, they took the cost of replacement as new, but Judge Gerber only allows $2K as used. For $6K in bedding, he allows $1200.

Repairs and painting aren’t theft losses. At best, they’re capitalized. For the rest, Judge Gerber Cohanizes about $6K.

Talk about “bearing heavily upon the party” whose inexactness causes the problem. Judge Gerber: “It was their failure to prepare and maintain adequate records and documentation in support of their claimed $29,979 theft loss deduction that resulted in our reaching a $9,194 total value of the items lost.” 2017 T. C. Sum. Op. 79, at p.

I don’t know if Paul Peter and Cath are professional lessors, but it doesn’t appear that they are, despite the careful photography. Pros have receipts for teacups and toasters, and depreciation schedules to bring a fleeting smile even to the face of that Master of Depreciation (in all senses of the word) Judge Mark V. Holmes.

Worse, they’re pro sese, so they don’t put in evidence of who gave them specific tax advice about how to take the loss, leaving the 20% negligence chop hanging, even if they get under the five-and-ten for understatement in the Rule 155 beancount Judge Gerber orders.

A cautionary tale for lessors, this. Official bank cashier’s checks for first rent and security if your tenant is less than WalMart; and receipts and depreciation schedules for everything.

  1. […] of course, Lew Taishoff had something.  Mr. Taishoff covers the Tax Court with an astounding thoroughness. He has a great summary of the […]


Leave a Reply

Please log in using one of these methods to post your comment: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: