Sixth Circuit affirms individual taxpayer not entitled to loss deductions 

November 7: The U.S. Court of Appeals for the Sixth Circuit today affirmed the Tax Court’s decision that the taxpayer was not entitled to a deduction for an alleged business or theft loss claimed as a result of a debt owed to the taxpayer. Alioto v. Commissioner, 12-1201 (6th Cir. November 7, 2012)

Read the decision: Alioto [PDF 34 KB]

Summary

In 2000 and 2001, the taxpayer spent several hundred thousand dollars of his own money on expenses relating to a new business venture in which he was involved with a television actor.


Although the taxpayer believed he would be reimbursed for these funds, he was never fully repaid. The taxpayer sought to deduct the unreimbursed funds as losses on his federal income tax return for 2005, and to carry forward some of these losses as deductions on individual income tax returns for 2006 and 2007.


The IRS denied the deductions and issued notices of deficiency to the taxpayer. The Tax Court agreed with the IRS determination, finding that the taxpayer had not met the burden of proof to show that the deductions were allowable as business losses or theft losses in the tax years claimed. Today, the Sixth Circuit affirmed, finding no clear error in the Tax Court’s determination that the taxpayer had not met the burden of proof to establish that the losses were deductible in tax years 2005, 2006, and 2007.



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©2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.


The KPMG logo and name are trademarks of KPMG International.


KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.


The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.


Direct comments, including requests for subscriptions, to us-kpmgwnt@kpmg.com.
For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at:

+ 1 202 533 4366

1801 K Street NW
Washington, DC 20006.

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