- Ag Docket
The plaintiffs, a married couple, bought stock in a small company which later came under SEC scrutiny for a “pump and dump” scheme as a result of the corporate officers releasing false information about sales that never occurred which enhanced the stock price before the officers sold their stock at a large gain. The buyers of the stock, including the plaintiffs, suffered a total loss as a result of an SEC investigation that halted trading. The company involved eventually filed bankruptcy. The plaintiffs claimed a deductible theft loss (ordinary loss that was fully deductible). The IRS claimed that the loss was a capital loss (which would only offset other capital gains or $3,000 of other income annually). The court noted that for the loss to qualify as a theft loss, the wrongdoers must have acted with the specific intent to deprive the taxpayer of their property, and the taxpayer must have transferred their property to the wrongdoers. The court, agreeing with the IRS, determined that the second part of the test was not satisfied – the taxpayers’ stock was not transferred to the corporate officers but was sold to general investors in an open market. Thus, the taxpayers’ stock had not been stolen. Greenberger v. United States, No. 1:14-CV-01041, 2015 U.S. Dist. LEXIS 80643 (N.D. Ohio Jun. 19, 2015).
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