The Tax Court decided an interesting theft loss case yesterday:  Rosen v. Commissioner, T.C. Memo. 2006-170 (8/16/06):  After failing to pay his taxes for 1999-2001, taxpayer claimed a $250,000 theft loss on his 2000 and tried to carryback and carryforward the loss.  At a hearing with the IRS, taxpayer petitioner claimed that his nephew had stolen several Rolex watches, an automobile, and bank funds from him.  The only evidence taxpayer submitted to prove the loss was "an ‘Affidavit of Judgement by Confession’ (affidavit of confession) filed with the State of New York civil court and signed by [the nephew]."  The Tax Court was unimpressed:

Petitioner, however, failed to prove that a theft occurred, the identity of the stolen property, his basis in the property, or the fair market value of the property immediately before the theft. See secs. 1.165-7(b), 1.165-8, Income Tax Regs. The only documentary evidence submitted in support of petitioner’s contention was the affidavit of confession. This document was filed with a civil court in the State of New York and merely operates as a confession of civil judgment, wherein [the nephew] acknowledged that he owes petitioner $250,000. It does not establish that the aforementioned property was stolen. In short, petitioner presented no credible evidence that a theft occurred. He has failed to establish that he is entitled to the section 165 theft loss deduction.