A theft is the taking and removing of money or property with the intent to deprive the owner of it. The taking must be illegal under the law of the state where it occurred and it must have been done with criminal intent.
Theft losses are generally deductible in the year you discover the property was stolen unless you have a reasonable prospect of recovery through a claim for reimbursement. In that case, no deduction is available until the taxable year in which it can be determined with reasonable certainty whether or not such reimbursement will be received.
http://www.irs.gov/taxtopics/tc515.html
Kelley Lynch's theft loss - re. her share of IP documented by corporate books, records, minutes - including those dictated by Cohen, non-revocable assignments, etc. occurred in the year 2004 and was confirmed in 2005 via Leonard Cohen's fraudulent and retaliatory lawsuit. Leonard Cohen wrongfully declared that he is the sole beneficial owner of BMT and TH and these were held in trust for him. The IRS has the corporate books and records and this was not an oral agreement or a simple breach of contract. That's why Steven Machat, a lawyer and accountant, advised me to sue Cohen for theft. Many others have as well.