Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Friday, September 30, 2016

Estate Allowed Theft Loss Deduction for Property Held by LLC

Tax courtThe Tax Court decided a case of first impression with the issue of whether an estate could take a theft loss deduction for a property held by an LLC. The decedent owned a 99% interest in a LLC, but the LLC’s only asset was an account involved in the Ponzi scheme. Accordingly, the estate claimed a theft loss deduction. The IRS, however, issued a notice of deficiency, claiming the estate did not incur a theft loss. Further, the IRS argued that the LLC suffered the loss and not the estate. The court ultimately concluded that the estate is “entitled to a deduction if there is a sufficient nexus between the theft and the estate’s loss.” Specifically, the court found that the nexus between the theft and the LLC interest was “direct and indisputable.” 

See Timothy M. Todd, Tax Court Allows Estate a Theft Loss Deduction for Property Held by LLC, Forbes, September 27, 2016. 

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.



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