Saturday, March 30, 2013

Cheerful Easter Wishes

Has LA County Been On My Blog Again?

30 Mar14:14:37IE 9.0
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Leonard Cohen, Kelley Lynch. Elton John, Sting, Billy Joel - On The Tower Of Song Tribute LP

Watch the Video.  This is before Leonard Cohen decided to target me, my family, and destroy my life, perjure himself, steal from me, etc.  If you find that inconceivable then you simply do not know Leonard Cohen or what he is capable of. It is truly pathetic and far worse ... LA County finally met a powerful celebrity and they will indeed lie for him,cover for him, and do whatever it takes.  That's their utterly nauseating celebrity culture.

View Tower Of Song Tribute to Leonard Cohen EPK Featuring Leonard Cohen, Kelley Lynch, Sting, Suzanne Vega, Billy Joel, Clint Black


Leonard Cohen - the recipient of the Tribute Album

Kelley Lynch - Executive Producer who conceived of the tribute album as a gift to Leonard Cohen.
Billy Joel

Suzanne Vega



Elton John


Evidence That Leonard Cohen Is The Only Party That Can Provide Me With The Information I Requested - Including A 1099 - For The Year 2004

From: Baxa, Diane <>
Date: Fri, Mar 29, 2013 at 12:48 PM
Subject: RE: Bank Statements
To: Kelley Lynch <>

I am not aware of any message having been left but the bank keeps copies of statements and checks for only 7 years.  The documents you have requested are more than seven years old and so would not remain on the bank’s system.

Diane Wemple Baxa Senior Vice President & Senior Counsel City National Bank 555 South Flower Street Eighteenth Floor Los Angeles, CA  90071 T:  (213)673-9510 F:  (213) 673-9503

This e-mail is intended solely for the named addressee(s) and may contain privileged or confidential information.  If you have received this e-mail in error or are not otherwise an intended recipient, please do not use or distribute this e-mail or its contents, notify me at once by return e-mail or telephone and delete or destroy this e-mail and any copies.
Thank you

The 14th Sharmapa - This is a description of why it is appropriate for Buddhist teachers to write books and involve in any social work which is deemed good for society.


This is a description of why it is appropriate for Buddhist teachers to write books and involve in any social work which is deemed good for society.

From the Time of Buddha until now, the curriculum of Buddhist study has been language (including all known spoken languages such as Sanskrit etc.), art (including painting, carving sculptures etc.), logic, natural sciences, social and political ethics, medicine, mathematics, world history, philosophy, mind science and meditation. 

When one completes these subjects they were expected to write a book on any one of these topics. Then, other scholars would examine and critique the views espoused in their master thesis. Once one had passed the critique of other scholars, they would get the degree of a Mahapundit. 

Accordingly, depending on how many subjects one had mastered, they would then receive particular umbrellas respectively. When one received an umbrella of peacock feathers, it indicated that they were a qualified pundit. When one received a gold painted umbrella, this meant they were considered a Mahapundit (a great Buddhist scholar). 

All of these subjects were studied in order to write books or teach to the public for the good of the people. If a book was deemed a particularly evil book, then the government would put that book on the neck of a dog and the book would have been paraded throughout the city. If a book was considered to be not so accurate, they would just ban the publication. 

The parading of the book on the neck of a dog has not been used for quite some time. However, the tradition of receiving criticism from other scholars has still been practiced up to the present day. According to the Buddhist view, writing a book is for the benefit of others. Therefore, they say your book must be logically accurate. If it is just your own thinking, and it is uncertain that it is beneficial for others, they say it is good to write in your own notebook but not fit for publishing, as it may mislead others. Otherwise, one can publish with the intent to have it scrutinized and validated by others for its accuracy. 

Buddhist teachers can write books on politics, ethics etc., if it is deemed good for society. Buddhist teachers are not merely Tantric gurus who hold ritualistic bells in their hands and stand next to statues. Therefore, I wrote the book "Creating A Transparent Democracy: A New Model" for the good of society and only after I was certain myself that it was logically flawless and was needed for the world today did I decide to publish it. 

If it is deemed by scholars to either be inaccurate or it is considered to be evilly written, then you are most welcome to treat my book in either of the previous ways mentioned. That is to say, you may ban the publication completely or parade it on the neck of a dog throughout the city. 

Best wishes, 
Shamar Rinpoche

Friday, March 29, 2013

Witness Tampering - Leonard Cohen, Robert Kory, Steven Lindsey, and Betsy Superfon

From: Kelley Lynch <>
Date: Fri, Mar 29, 2013 at 3:43 PM
Subject: Witness Tampering - Leonard Cohen, Robert Kory, Steve Lindsey, and Betsy Superfon
To: "Francisco.A.Suarez" <>,, "*irs. commissioner" <*>, Washington Field <>, ASKDOJ <>, "Kelly.Sopko" <>, "Doug.Davis" <>, Dennis <>


I spoke to Neal Greenberg's lawyer, Dan Scheid, a few years ago.  At that time , he confirmed (in writing) that he has evidence relating to witness tampering on the part of Leonard Cohen, Robert, Kory, Steve Lindsey, and Betsy Superfon.  After he advised me to have a lawyer I didn't know subpoena that evidence, I contacted the Denver FBI as this matter absolutely crosses state borders and - as the agent noted - is taking place all across this country.  In any event, this Denver FBI agent and I discussed the fact that it is important to handle evidence carefully.  And, after the number of lying lawyers I have encountered, I think that's abundantly apparently.  In any event, I have copied Dan Scheid in on this email and thought perhaps you might like to speak with him prior to oral arguments in my appeal.  

All the best,

IRS Binder - Concealed Evidence, Fraud, Perjury, Concealment, Lies, Tax Fraud, Etc - Do These Constitute Leonard Cohen's Religious Beliefs?

IRS Binder
Exculpatory Evidence Highlights

Tab 2 - Letter from Robert Kory to Internal Revenue Service dated December 13, 2005 regarding Tentative Refund Application 1037704856.

This letter - to IRS/Fresno - confirms receipt of Form 6762 regarding the Request for Missing information to Complete Tentative Refund Application.  

Tab 3 - Letter 662C from IRS dated February 3, 2006 confirming Tax Refund for Leonard Cohen for tax periods December 31, 2001, December 31, 2002, and December 31, 2003.

This form confirms that the IRS is processing Cohen’s request for adjustment, dated December 13, 2005.  The IRS encloses copies of the corrections made to Cohen’s form 1045 (Application for Tentative Refund).  It confirms that Cohen will receive the following refunds - $557,196.00, $56,725.00, and $50,919.00 within 4 to 6 weeks.  

NOTE These refunds, discovered at my trial, have now been challenged with the IRS. Leonard Cohen concealed corporate books, records, etc. and had the audacity to obtain a tax refund. Leonard Cohen's habit of greed has clearly caught up with him and shows no signs of abating. It shocks the conscience. Then again, so does his testimony in my intent to annoy trial, testimony about Phil Spector, lies about the IRS, and so forth and so on. Prosecutor Sandra Jo Streeter was so delighted to meet a celebrity. I literally witnessed her gushing into her cell phone about this. It was and remains nauseating that this is how the City Attorney thinks taxpayers should indulge him and his office's outrageous targeting of innocent people for celebrity frauds. In any event, these outrageous refunds have now been challenged with the IRS - formally.

Tab 4 - Letter from Robert Kory to Agent Luis Tejeda/Internal Revenue Service Fraud Unit Division of the Western United States dated March 9, 2007.


Falsely accuses me of being Leonard Cohen’s business manager who was dismissed; falsely accuses me of being engaged in a “long running embezzlement scheme” directed at Leonard Cohen.  His letter addresses 3 points:  1)  Confirming a meeting with Agent Tejeda at his office on April 19, 2007 during which time he will present evidence supporting these false accusations (the evidence includes the fraudulent expense ledger that conceals corporate ownership interests, assets, liability, and equity); 2) Agent Tejeda indicated that he would be joined by additional staff from the IRS - Kory would like to know who will be joining Agent Tejeda and notes that he will have Michael Mesnick, CPA present; and, 3) Kory advises Agent Tejeda that I am using a communication I received from Agent Sopko dated March 6, 2007 which reads:

NOTE Agent Tejeda/IRS himself was concealed at my trial and prosecutor Sandra Jo Streeter lied when she advised the judge that there's an IRS holding re. the default judgment. No such holding exists. I suppose Streeter didn't want to address the fact that the refund was confirmed in 2005 and I met with Agent Sopko and her partner in 2007 and referred to Agent Tejeda/IRS - Head of Fraud for the Western Division of the United States.

March 6, 2007

Good afternoon Ms. Lynch,

Per our meeting last week, I have found a solid IRS contact that will be better able to assist you.  His name is Luis Tejeda, and he is the head of a fraud group at IRS.  I spoke with him today and advised him that I would be passing on his contact information to you.  

office phone and address noted.

He emphasized that you will need to put something in writing - a summary of all important details, with as much specificity as you have.  (For example if you have copies of any paperwork involved, or social security numbers of people involved …)  Once you pass the information on to him, he will review it and proceed accordingly.  As standard practice, you will not get confirmation that your information was received.  However, you may contact Tejeda to follow-up.

I hope that this information is helpful to you.  If there is anything else I can assist you with, please be sure to let me know.

Kelly A. Sopko
Special Agent
Treasury IG for Tax Administration (TIGTA)
Special Inquiries & Intelligence Division

Kory notes, in his letter, that I have alleged that I was reporting Cohen to the IRS for tax fraud.  While that was a “nuisance,” the situation has changed.  “Ms. Lynch has managed to obtain a return email from Special Agent Kelly Sopko, the contents of which” Kory read to Agent Tejeda.  Kory goes onto falsely state that I am using communications from the Internal Revenue Service to defame Mr. Cohen and to use the threat of an IRS investigation to attempt to “extort” resolution of civil claims.

NOTE  I refused to meet with Cohen or his representatives; was over 50% community property (Dale Burgess, my former accountant, and others - my lawyers - were present for this offer), asked Betsy Superfon to have Kory fax me the deal they had in mind (and was told it’s not the type of deal you can fax - Superfon thought it was “illegal”), and have requested nothing other than the IRS required form 1099 for the year 2004; demanded that Cohen rescind the illegal K-1s issued in 2003, 2004, and 2005, requested an accounting that addresses corporate ownership interests, assets, liabilities, and equity), etc.  Leonard Cohen falsely accused me of receiving overpayments re. my personal management fees.  That is a bald-faced lie and he has concealed all corporate books, records, stock certificates, notarized documents, memoranda, other materials, and my indemnity with respect to Traditional Holdings.  He has also concealed his loans - in the millions - from Traditional Holdings, LLC that were to be repaid with 3 years at 6% interest.  Kory wrote my lawyers in 2004/2005 and asked if these loans would be forgiven.  The answer was and remains “no.”  Traditional Holdings’ assets are not Leonard Cohen’s to squander and use as his personal piggy bank.  He has taken the legal position that he is the alter ego of these entities who has engaged in self-dealing.  He has falsely declared that he is the sole beneficial owner of both Traditional Holdings, LLC and Blue Mist Touring Company, Inc. and fraudulently declared that these were held in trust for him.  That is a blatant, bold, and fraudulent misrepresentation that reckless and willfully disregards all corporate records.  Relevant excerpts (though most certainly not limited to) in his Declaration are as follows:

I am also the beneficial owner of Traditional Holdings, LLC.  See corporate books, records, stock certificates, notarized documents, memoranda and other materials, and my indemnity agreement.  

I confronted Ms. Lynch, who admitted to having taken “millions”without any authorization.  I immediately terminated her employment and authorized a forensic investigation into all my financial affairs.    

Leonard Cohen embellishes reality.  This is a bald faced lie.  His accountant, Kevin Prins, flew to the Bay Area to meet with mine and was clear - he did not have the corporate books and records, back-up documentation, re. these entities.  My accountant, Dale Burgess, addressed this in a fax to me and my lawyers at the time and mentioned that neither my lawyers nor Kory appeared to want a copy of the fraudulent ledger.  Leonard Cohen clearly views himself as the alter-ego of these entities who has engaged in self-dealing.  Leonard Cohen didn't confront me. He heard I was going to the IRS (having been used horrendously) and flew in from Montreal. When we met, he offered me anything I wanted and asked me to meet with him, his tax lawyer, and hand over the corporate books and records - and, assist them in unraveling their handiwork. I refused and handed over the corporate books and records to my lawyers. Leonard Cohen might have a hard time explaining away his offer of 50% community property, presumably to lie and say his advisers defrauded him. Dale Burgess - my accountant who I did NOT fire (and who advised me that CID/IRS should be invovled in this matter and was concerned for my safety and welfare when we last spoke) - asked me to call the Treasury agents back who I met with to confirm for them that he would testify to witnessing this offer. My lawyers witnessed it as well. I just phoned my former lawyers, DiMascio & Berardo, to explain Cohen/Kory/Rice's testimony and informed them that I am waiting a/c privilege for the IRS, FBI, DOJ, Treasury, FTB, and Phil Spector's legal team. They asked me to confirm this in a letter. I explained that Cohen and his representatives took the position that they provided my lawyers with all taxs documents - HOWEVER, the IRS confirmed that they have not received a 1099 for me re. 2004. I haven't received one and Streeter, Cohen, and Kory lied about this matter. The IRS advised me to file fraud form 3949a re. Cohen's fraudulent refund and the illegal K-1s he testified about.

From 1998, I orally agreed to increase the compensation payable to Ms. Lynch for her services from 10% of my gross revenue to 15% of my gross revenue.  This is a bald-faced lie.  Furthermore, our agreement was 15% dating back to 1988.  We planned on a third party accounting after the final deal that Cohen testified he was “examining.”  He never paid me for my work on that deal. Leonard Cohen appears to believe I was his slave.  

I have learned that Ms. Lynch not only illegally and fraudulent overpaid herself from … LC Family Trust, LC Investments, and Traditional Holdings.    Bald faced lie.  My fees as Cohen’s personal manager have NOTHING whatsoever to do with my assets that ended up in LC Family Trust, LC Investments, or Traditional Holdings.  See all non-revocable assignments dating back to 1967.  Neal Greenberg was clear - these assignments were permanent and confirmed that I had a meeting with Cohen on this topic.  

Based on the forensic audit by Moss Adams LLP, I have concluded that Ms. Lynch has illegally and fraudulently taken from me in excess of $7 million since 1998.  This is not an accounting; nothing was taken illegally or fraudulently ; the figures are preposterous; Leonard Cohen continues to conceal corporate books, records, stock certificates, ownership interests, corporate distributions, etc.  The man cannot stop lying.  

Tab 5 - Letter from Robert Kory to Agent Luis Tejeda dated March 11, 2007 re. allegations made by Kelley Lynch against Leonard Cohen.


While I understand that you must be open to Ms. Lynch’s allegations, I would ask that you take whatever steps might be in your power to limit communications that she can then use to further “defame” Leonard Cohen.  

What defamation? Leonard Cohen committed tax fraud and I have provided the IRS with an abundance of evidence. His tax fraud may date to the time he received his first green card in the late 60s, early 70s. I have also provided the IRS with the corporate books and records that Cohen has attempted to willfully conceal.

Tab 6 - Letter from Robert Kory to Agent Luis Tejeda dated March 23, 2007 regarding Cohen’s judgment against Kelley lynch for breach of fiduciary duty, common law fraud, breach of contract, accounting, conversion, and imposition of constructive trust and injunctive relief  

Conversion is a common law tort. A conversion is a voluntary act by one person inconsistent with the ownership rights of another.[1] It is a tort of strict liability.[2] Its criminal counterpart is theft.

NOTE The individual who engaged in conversion/theft is Leonard Cohen.

Francisco, this raises very serious issues that also involve the District Attorney’s office.  Prosecutor Sandra Jo Streeter was clear - I reported Cohen’s fraud to the DA’s Major Fraud Unit although her line of questioning (were my tax documents on the DA’s website and other such insanity) was and remains deranged.  This issue remains a mystery.  The DA’s office thinks it is acceptable to send me on a wild goose chase, insult me, threaten me, and generally engage in unconscionable governmental conduct whenever I attempt to determine the reasons for their decision not to investigate or prosecute Leonard Cohen for fraud or theft.  I have pointed out the evidence and witnesses to them.  This evidently annoys Steve Cooley which is absurd.  Leonard Cohen has also, from what I can tell, defrauded the taxpayers of millions of dollars in tax revenues.  Furthermore, he has stolen millions from me and willfully concealed all evidence that proves this to be true.  He has also withheld commissions for work I have done.

Tabs 6a, 6b, 6c, 6d, and 6e are documents from Cohen’s fraudulent and retaliatory lawsuit against me:  Complaint dated August 15, 2005, Case Summary dated August 15, 2005 (only discovered this at trial), Declaration of Leonard Norman Cohen, Declaration of Kevin Prins, Declaration of Scott Edelman.  

I think we’ve reviewed the key elements re. fraud, perjury, lies, and concealment - as well as Cohen’s attempts to obstruct justice and retaliate against me for reporting his tax fraud to the IRS.  Please do keep in mind that at the bail hearing - March 23, 2012 - he confirmed that I never stole from him and advised MacLean’s in 2005 that he was not accusing me of theft.  He was very clear with MacLean’s - Neal Greenberg was the trusted guardian of HIS assets.  I have addressed Sandra Jo Streeter’s preposterous assertions that TH only had $150,000K in assets in its account.  I have no idea what bank account she was referring to.  Let’s review Cohen’s transaction fees that should not have been paid with corporate assets.  They were to be repaid within three years and the interest was set at 6%.  Someone has recharacterized the nature of certain of these expenses which are Leonard Cohen’s personal expenses.  I am not addressing the other loans he has taken which are substantial:  On page 16 of the Complaint (contained in the IRS binder) Cohen lists his personal transaction fees re. TH.  They total $2.7 million.  He did not pay $500K to the IRS for taxes and penalties due on the $1 million income deposit he received in 1999 which should have gone to TH.  He did not pay his lawyer, Richard Westin $100K from TH.  With the $1 million Leonard Cohen personally received as the deposit on the TH deal and the houses he testified he bought for his son and girlfriend, Leonard Cohen’s loans (without addressing the others as there would need to be an actual audit of Greenberg’s books, huge upfront commissions, other commissions, losses, etc. and an accounting), total - for these expenditures only - approximately $4.3 million from TH with 6% interest to be added to that amount.  Cohen, Kory, Rice, and Streeter concealed this from the jurors and there are other substantial Leonard Cohen loans from TH.  They were not excellerated annuity payments and no fiduciary obligation would have arisen until 2011, at which point Cohen’s financial investor and adviser (Neal Greenberg) had lost all his clients’ money and was charged with fraud by the SEC.  

Many other issues are raised with the legal documents enclosed in the IRS binder.  Let me know if you would like to discuss all Cohen’s lies, fraud, perjury, and concealment.  Has the City Attorney taken the position that they do not believe Leonard Cohen committed tax fraud and has the right to conceal corporate books records, etc. and steal from me, withhold my commission, etc?  What legal basis would support that position on their part?  Please give that some thought.  In closing argument, Streeter accused me of stealing from Cohen and said this undermined my credibility.  She is a bald faced liar and continues to conceal the email she received from Cohen on April 5, 2012 re. Phil Spector and a different version of the gun story he testified about that also totally undermines the version the prosecutors used in Phil Spector’s matter.  We have discussed the situation re. Mick Brown and my communications about the Grand Jury, statements/testimony, and the fact that the prosecutors used a version of the Leonard Cohen/Phil Spector gun stories in their motions.  These are available online - including at LA Superior Court.  I was NOT served the complaint/summons in this matter.  The proof of service is fraudulent.  I did not have a female co-occupant named Jane Doe with two black eyes.  LA Superior Court does NOT have jurisdicion over me and does not have jurisdiction over Traditional Holdings or Blue Mist Touring.  They were not named as parties to the lawsuit and were not held in any type of trust for Leonard Cohen.  There is no trust document.  Can LA Superior Court substitute a declaration for corporate books and records?

Tab 7 - Default Judgment against Kelley Lynch dated May 15, 2006.  We have discussed this.  I lost my home in December 2005.  I was not served or notified of the default.  Further confusion arose as the news media widely reported that Cohen obtained a default judgment against me in 2006.  The default judgment was in the IRS binder.  Streeter questioned me over that but not the proof of service re. the complaint.  The Attachment to the default judgment wrongfully declares that “Lynch is not the rightful owner of any assets in Traditional Holdings, LLC, Blue Mist Touring Company, Inc., or any other entity related to Cohen” and further states that these legal entities were set up for the “benefit of Cohen” and “she holds as trustee for Cohen’s equitable title.” This is a bald faced lie, Francisco.  And, if Cohen - who appears dead set on proving he defrauded me - wants to say these are part of his estate, he is lying.  Neither of these corporations was included in his estate planning.  He received a letter from his tax lawyer, Richard Westin, that clearly sets out his estate planning, etc. and refers to it in this lawsuit.  He understood that the assignments re. intellectual property (dating back to 1967) were non-revocable and he dictated the language re. my compensation for prior work.  I was Cohen’s publishing administrator and served in other capacities as well.  My ownership interest in the IP has NOTHING to do with my fees as Cohen’s personal manager.  Cohen’s lawyer tried to convince me to get involved in some psychotic cap gain scam with respect to my personal management commissions and I REFUSED.  That’s why he created The Ekajati Company in Nevada which I refused to use.  Leonard Cohen steals.  He stole Steven and Marty Machat’s share of intellectual property in Stranger Music and withheld commissions due Machat & Machat after Marty Machat passed away which is revolting.  Leonard Cohen came up with some fraudulent narrative about my using Blue Mist Touring Company, Inc. in order to attain a cap gain tax on my personal commissions.  That is absurd.  Here’s the insane corporation Richard Westin created.  I refused to use it and, of course, he created it in Nevada.  Another company (that I should or did own 15% of) - Old Ideas, LLC that is a Delaware entity which should own the IP re. Cohen’s album Dear Heather.  I believe Leonard Cohen saw his tax fraud as an opportunity to further defraud me.  He is that greedy.  The judgment is void.  LA Superior Court, as usual, has no jurisdiction over me.  They simply do NOT care about constitutional rights, due process, the truth, or anything that even faintly resembles a fact or evidence.  


Created by Richard Westin.  I refused to use the entity.
Nevada Entity No. C9688-2001
File Date  4/16/2001
Articles of Incorporation filed.

IRS - NOTE  What evidence did Cohen provide the IRS in order to support his request for a refund?  Clearly not the corporate books, records, stock certificates, etc.  

Loss of property because of theft may be tax-deductible. According to the IRS, “a theft is the taking and removing of money or property with the intent to deprive the owner of it. The taking of property must be illegal under the law of the state where it occurred and it must have been done with criminal intent.”

iguring and Proving a Loss

To figure your deduction for a casualty or theft loss, first figure the amount of your loss:

  1. Determine your adjusted basis in the property before the casualty or theft.
  2. Determine the decrease in fair market value of the property resulting from the casualty or theft.
  3. From the smaller of the amounts in steps 1 and 2, subtract insurance or other reimbursement you received or expect to receive.
Ex: A fire destroys a sofa you bought 10 years ago for $1,000. Before it was destroyed, you could have sold the sofa for $500. Now, to replace the lost sofa with a comparable sofa, you'll pay $1,800. Your casualty loss is the decrease in fair market value caused by the fire ($500) and not the replacement cost nor the original cost.
You should prove a casualty caused your loss. So, keep newspaper accounts and other proof showing the type of casualty that struck your area and the amount of damage it did.
To prove the amount of your loss, you should have:

  • Purchase receipts for the affected property
  • Receipts for improvements made to the affected property
  • Pre- and post-casualty appraisals for the affected property
To learn more, see IRS Publication 547: Casualties, Disasters, and Thefts.

Theft Losses

Theft losses happen when someone takes your money or property and intends to deprive you of it. To qualify as a theft for tax purposes, the event must be illegal under your state's laws. You can usually take a deduction when your loss is from crimes such as blackmail, burglary or robbery.

Proving Your Deduction

You need proof to support taking a deduction. You should be able to explain or show:

  • The type of casualty, and the date it happened. If it's a theft, you must explain when you noticed that your property was missing
  • A direct connection between the casualty and the destruction of your property. In the case of theft, you need to show it was actually stolen and that you didn't lose or misplace it
  • You owned or leased the property
  • Any money you were paid or expect to be paid as reimbursement for the loss, such as an insurance payment

Figuring Your Deduction

If your business or income-producing property is completely destroyed or stolen, you calculate your loss by:

  1. Figuring out your adjusted basis in the property. This is usually the price you pay for the property plus any increase in value, such as improvements, and minus any decrease in value, such as for depreciation
  2. Subtracting from the adjusted basis any salvage value of the property. Salvage value is what someone would pay for the property at the end of its useful life. The IRS has tables to help you determine the useful life of your property
  3. Subtract from the amount in Step 2 any money you were paid as reimbursement for the loss, such as insurance payments
If your property isn't completely destroyed, you calculate your deduction by taking the lesser of the:

  • Difference between the property's fair market value (FMV) before and after the casualty. Generally, FMV is the price you could get for the property if you sold it on the open market. Appraisals are often used to show FMV
  • Adjusted basis of the property
Similarly, you have to reduce the amount of the deduction for partially destroyed property by any reimbursements you receive.

White Collar Crime Victims - Fraud Tax Loss

“White Collar” Fraud manifests in a myriad of ways, including, but not limited to the following:

1. “Ponzi Schemes,” sometimes referred to as “First In, First Out” or Vertical Marketing Fraud
2. Real Estate Fraud
3. Securities Fraud
4. Internet Fraud
5. Entertainment-Related Fraud

For United States citizens and/or other individuals who are required to file Federal Tax Returns and who may have been a victim of fraud, there may be available to them a vehicle to mitigate their fraud loss by way of an income tax loss defined as a “theft loss” subject to a “casualty loss deduction.”

To obtain this benefit, the taxpayer would be required to initiate litigation against the party, parties, entity or entities who perpetrated the fraud in the first instance.  The initiation of a complaint to recover the fraud losses creates an income tax deduction which may generate tax refunds which can offset the cost of the litigation.  Taxpayers need not prevail in the underlying litigation in order to generate those tax refunds.

Income Tax planning strategy includes tax savings, tax refunds, tax-free income.

1. Tax Savings - 41% Federal/California income tax savings (“Blended Tax Rate”). For example, a $5 million fraud lawsuit from theft may support a $5million tax loss generating $2.05 million in income tax savings.
2. Tax Refunds – Under IRC§172(b)(1)(F), the tax loss (for theft) may be “carried back” for 3 years (by filing form 1040x, IRS). Any income taxes paid during the 3 prior “carry back years” may be subject to refund.
3. Tax-Free Income – The tax loss for theft may be carried forward for up to 20 years under IRC§172, offsetting taxable income which may create “tax-free” income.

Casualty/Theft Loss (Federal Law)

Theft Defined.
Theft is the illegal taking of money or property with the intent to deprive the owner of it. (W. Lafave, Criminal Law section 8.5, at 721 (2d Ed. 1986)).  Theft includes, but is not limited to, larceny, embezzlement, and robbery. (Reg. Section 1.165-8(d)).

Federal Law.
In the case of Gerstell (Petitioner) v. Commissioner of Internal Revenue (Respondent) 46 T.C. 161 (Docket No. 4299-64, filed May 4, 1966), the Tax Court States (at Page 7):

Section 165 of the Internal Revenue Code of 1954 provides for the deduction of losses arising from theft.  The term Theft . . . converting any criminal appropriation of another’s property to the use of the taker, particularly including theft by swindling, false pretenses, and any other form of guile.

It has been held that a criminal conviction is not a necessary element in a Taxpayer’s proof that a theft loss has been sustained. (See: Michele Montelone 34 T.C. 688 Paul C.F. Vietzke 37 T.C. 504)

Whether a loss arises from theft depends upon the law of the jurisdiction where the loss was sustained.  Edwards v. Bromberg (C.A. 5) 232 F. 2d 107

California Penal Code Section 484(a)
Under California State Law, California Penal Code Section 484(a), theft is defined to include fraud:

Every person who shall feloniously steal, take, carry, lead, or drive away the personal property of another, or who shall fraudulently appropriate property which has been entrusted to him or her, or who shall knowingly and designed by, any false or fraudulent representation or pretense, defraud any other person of money, labor or real or personal property, or who causes or procures others to report falsely of his or her wealth or mercantile character and by thus imposing upon any person, obtains credit and thereby fraudulently gets or obtains possession of money, or property or obtains the labor or service of another, is guilty of theft.

Statement of Federal Law: Theft Losses (Summary).
IRC § 165(a) provides as a general rule that “any loss sustained during the taxable year” may be deducted if it is not compensated for by insurance or otherwise.

Theft Loss Tax Deduction
(IRC §165(c)(2)(3))

Under IRC §165, an individual may deduct losses arising from “fire, storm, shipwreck, or other casualty or from theft.”

Under IRC §165(c)(2), an individual may deduct theft losses involving a transaction entered into for profit.

Under IRC §165(c)(3), an individual may deduct losses due to theft (see Treas. Reg. Section 1.165-8(d)).

A loss arising from theft is treated as sustained during the taxable year in which the Taxpayer discovers the loss (IRC §165(e)(1)).

The deductible amount is the lesser of the fair market value or basis of the property stolen (Treas. Reg. §1.165-8(c)), IRC §165(b).

An individual is permitted to deduct losses to her property arising from “fire, storm, shipwreck, or other casualty, or from theft.” The term “other casualty” defined as a sudden, unexpected event that is unusual in nature and beyond the control of the taxpayer.

A theft loss technically is not a casualty loss, but theft losses are aggregated with casualty losses for most purposes. The first $500 (2009) of each personal casualty or theft loss is not deductible, and personal casualty and theft losses are generally deductible only to the extent they exceed 10 percent of the taxpayer’s AGI.

Casualty and theft losses that arise in a trade or business or activity engaged in for profit are deductible (as are other losses arising in these activities).
The portion of a loss that is reimbursed by insurance is not deductible (Code Section 165(a)).  A personal casualty or theft loss is deductible only if the taxpayer files a timely claim for any insurance covering the loss. Code Section 165 (h) (5) (E).

Taxpayers claiming casualty and theft losses must file Form 4684, Casualties and Thefts, with their tax returns to claim the deduction. The IRS has also made available two workbooks, IRS Publication 584, Casualty, Disaster, and Theft Workbook, and IRS Publication 584B, Business Casualty, Disaster, and Theft Workbook, which contain schedules used to compute personal and business casualty and theft losses, respectively.