Craig K. Potts and Kristen H. Potts, T. C. Memo. 2025-108, filed 10/16/25, claim they were robbed in Turks & Caicos when they bought some stock in a gambling operation. Craig & Kris were cash machinists in Native American casinos who diversified into slot machinery in those delightful Islands in the Sun.

There, they claim, two dudes who ran a routing operation (running the slots, taking the cash, paying the taxes to the T&C Gaming Commission and dividends to the lucky shareholders) told them the $2.5 million USD Craig & Kris paid them for stock in the business was going back into the business, except they absconded with $2 million USD thereof, hence the theft loss they took and IRS disallowed. The absconders never installed the legendary neon sign in the hotel where they were supposed to build this fancy casino which never got built.

Except.

If you claim you’re robbed, you have to prove it. Craig & Kris put in no evidence of Turks & Caicos law; their factual theft claim was supported by a lawyer who didn’t represent them and whose testimony Judge Cary Douglas Pugh found unworthy of belief. T. C. Memo. 2025-108, at p. 17.

Judge Pugh goes through the local law herself and finds the only offense that could qualify requires a written statement, which Craig & Kris don’t have. The purchase documents don’t say anything about what the seller is to do with the proceeds of sale, and have the usual integration clause (“entire agreement of the parties, no oral or written document contradicts”).

Anyway, Craig & Kris bought the stock from a corporation which the alleged fraudsters controlled. Craig & Kris never said the stock was worthless and could only raise the Section 165(g) claim on an independent event showing worthlessness. If anyone was deceived it was the corporation whose cash the alleged fraudsters supposedly took.

If you want to find out about how slot machinists do their thing in Turks & Caicos, read the opinion. Me, when I was there forty years ago, I went sailing and swimming.