Tax consequences to an individual whose stock, securities or other property lose value by reason of a crime may be significantly affected by whether the losses “arise…from theft” within the meaning of Internal Revenue Code (IRC) Section 165(c).
A loss not compensated for by insurance or otherwise is allowable, in general, as a deduction under Section 165(a), but that rule is subject to numerous limitations. Among those limitations is that, if the loss is attributable to a capital asset, and realized through a sale or exchange, it will be a capital loss and therefore deductible (above a de minimis amount) only to the extent of capital gains.
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