Alioto v. Commissioner, 699 F.3d 948

Alioto spent about $200,000 of his own funds in 2000–2001 on BRT expenses and sought reimbursement from Ratzenberger but was not fully repaid.
Alioto took a 2005 bankruptcy filing listing $341,363 in BRT-related expenses as debts owed to him; discharge occurred in 2006.
The Aliotos filed a joint 2005 tax return claiming unreimbursed BRT losses; Alioto filed separate 2006–2007 returns.
The Commissioner issued deficiency notices for 2005–2007; the Tax Court ruled against deductions for those years.
On appeal, the Sixth Circuit affirms, holding no clear error in the Tax Court’s finding that the losses were not deductible for 2005–2007.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the 2005 loss is deductible under § 165(a).	Alioto asserts losses were sustained in 2005 due to no reasonable prospect of recovery.	Commissioner contends the loss was not sustained in 2005; there was no reasonable certainty of non-recovery.	Losses not deductible for 2005
Whether Alioto abandoned the reimbursement claim in 2005, fixing the loss year.	Alioto points to an alleged 2005 email and bankruptcy filing as abandonment evidence.	There was no objective evidence of abandonment in 2005; credibility determinations support otherwise.	No clear abandonment in 2005
Whether the BRT losses qualify as theft losses under § 165(e).	Alioto argues Ratzenberger’s false pretenses constituted theft under Massachusetts law.	Tax Court found no evidence of criminal intent or false statements by Ratzenberger.	Not deductible as theft losses
Whether the Tax Court’s factual findings were clearly erroneous and the deductions were properly denied.	Alioto challenges the credibility and evidentiary weight of the Tax Court’s findings.	Tax Court’s credibility determinations were properly deference-worthy and supported the decision.	Tax Court’s findings affirmed

Ekman v. Comm’r, 184 F.3d 522 (6th Cir. 1999) (burden of proof and deductions require showing proper statutory requirements)
Boehm v. Comm’r, 326 U.S. 287 (1945) (loss sustenance requires objective certainty rather than sole subjective belief)
Krahmer v. United States, 810 F.2d 1145 (Fed. Cir. 1987) (theft loss requires demonstrable intent and evidence)
Washington v. Comm’r, 974 F.2d 1339 (6th Cir. 1992) (uncorroborated taxpayer testimony may be insufficient credibility support)
Davis v. Comm’r, 866 F.2d 852 (6th Cir. 1989) (credible evidence required beyond self-serving assertions)
Farcasanu v. Comm’r, 436 F.2d 146 (D.C. Cir. 1970) (theft-loss deductions require criminal intent)
MTS Int’l, Inc. v. Comm’r, 169 F.3d 1018 (6th Cir. 1999) (state-law theft definitions govern § 165(e) analysis)
Estate of Meriano v. Comm’r, 142 F.3d 651 (3d Cir. 1998) (state-law theft concepts apply to federal deduction questions)
Commonwealth v. Mills, 764 N.E.2d 854 (Mass. 2002) (Massachusetts larceny elements inform theft-loss analysis)