D. Stussy wrote:

- quote -

I suppose if he did, he'd get a casualty loss but offsetting
income for the amount stolen.

Stu

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David Woods, EA, ChFC, CLU wrote:

- quote -

.....Or a dividend paid.

I agree that it is hard to show that one stole from
himself....

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Drew Edmundson <drewsbeagles[at]hotmail.com> wrote:
- quote -

The preceding paragraph is the crux of the matter. You have
Correction: The "you" in the preceding line refers to the
original poster. *Not* to Christopher Green. My apologies
to anyone that misunderstood. my comment.

--
Drew Edmundson, CPA (NC)

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cj.green[at]worldnet.att.net (Christopher Green) wrote:
- quote -

The preceding paragraph is the crux of the matter. You have
probably underreported prior years income. If so, the
proper thing to do is amend those returns and increase
taxable income. Assuming you found the theft in 2004 and
recover nothing then the deduction is in 2004. So over the
years you get a net income change of zero but for the prior
years you will owe with related interest. In addition with
rates dropping you may save less in 2004 than you pay in the
prior years.

This is a very unfair law.

--
Drew Edmundson, CPA (NC)

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"SteveW" <swardlow[at]swbell.net> wrote:

- quote -

Seems to me you'd have to start by mitigating your loss. If
you can prove the embezzlement, you should have a claim
against his estate. Somewhere early in probate, there will
be a deadline before which creditor claims must be filed.

The $80,000, plus the corp's costs to pursue a claim, less
whatever is recovered, would be your loss. Business casualty
and theft losses are normally deductible in full. But I
believe the result would be different if the scheme of
embezzlement involved understating income (say, by
underreporting sales and pocketing the difference): then you
may not have a loss for amounts that were never reported as
income.

--
Chris Green

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"SteveW" <swardlow[at]swbell.net> wrote:

- quote -

Well it would be pretty hard to prove an owner stole from
himself, even a 50% owner. I would consult a lawyer in any
case, but some possibilities would be to consider the money
cash in redemption of his stock, a disproportionate
distribution, or a loan receivable from him and his estate.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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- quote -

That depends on whether the funds were originally reported
as taxable income. If the cash was taken before being
recorded, you really don't have a taxable casualty loss. If
the income was recorded and included in taxable income, then
you do have a loss. Get a CPA who specializes in fraud to
help you identify the amount of the loss more carefully.

I think you should first make a claim against his estate to
see if there is anything there (most embezzlers don't have
much money available).

--
Thomas E Healy, CPA, PC
1650 38th St., Ste 202W
Boulder, CO 80301
Please send email to: tom[at]tomhealycpa.com, since I block all email at my
newsgroup address.
phone (303) 443-1804
fax (720) 489-3772

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I am a 50% shareholder in an S-corp. The other shareholder
recently died, and it was discovered he embezzled $80,000
from the business, all in cash. Could I make a case for a
casualty loss, and if so, what kinds of documentation would
I need?

Thanks

Steve

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