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  • Court Case Brief Schroerlucke V. United States Case Study
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Court Case Brief Schroerlucke V. United States Case Study

Unreimbursed Theft Loss Schroerlucke vs. U.S., 2011 WL 4440599 (Fed. Cl.)

Facts

Mr. And Mrs. Schroerlucke claim they were due a tax refund for unreimbursed losses for 1997, 1998, 1999, and 2002. Mr. Schroerlucke had worked for World Com until he terminated employment on January 4, 1999 and had accumulated stock options. He had exercised all options and retained full ownership and had all rights in decisions pertaining to the stock. The last of the stock was sold on May 1, 2002, May 24, 2002, and September 12, 2002, in which he received some cash from the sales.

On April 11, 2003, Mr. And Mrs. Schroerlucke filed their 2002-1040 tax return with a long-term capital loss of $6,741,358 and received...

On April 7, 2006, Mr. And Mrs. Schroerlucke filed a 2002 1040X to claim the losses as a theft loss under provisions 26 U.S.C. 165 (2006), claiming an additional $9,959. Based on carry back in 2002, they claimed additional refunds of $63,018, $39,366, and $2,549,207 for 1997, 1998, and 1999 respectively. The total claims equaled $6,530,047.53. IRS denied the refunds on July 31, 2008.
Mr. And Mrs. Schroerlucke filed a complaint on November 10, 2009 alleging they were victims of theft and theft by deception under Georgia law. They claimed a refund of $2,661,550 for unreimbursed theft loss. The claim was denied based on the fact that there cannot be a theft under Georgia law. IRS filed a summary…

Sources used in this document:
There is evidence that the courts have adopted the state law test to determine if a theft has actually occurred, DeFusco v. Comm'r, 38 T.C.M. At 922, Paine vs. Comm'r, 63 T.C. At 740. Therefore, is it permissible to use the Georgia State law to determine if they theft occurred because Georgia is the state of residence for Mr. And Mrs. Schroerlucke.

The Official Code of Georgia Annotated (OCGA) 16-8-4 (West 2011) (theft of conversion) and OCGA 16-8-5 (West 2011) (theft of services) was relevant to this case. The theft of services could not have occurred because Mr. Schroerlucke terminated employment on January 4, 1999 and received all compensation he was entitled to at that point. He had exercised all stock options and retained all the rights to them at that point.

Mr. And Mrs. Schroerlucke alleged that World Com stole Mr. Schroerlucke's investments by hiding the fraudulent activities to artificially inflate the stock price or by changing the business from lawful to unlawful practices. The Georgia law states a theft occurs when one "unlawfully takes or, being in lawful possession thereof, unlawfully appropriates any property of another with the intention of depriving him of his property, regardless of the manner in which the property is taken or appropriated." Mr. Schroerlucke had exercised the stock options and retained full rights. World Com had given him all he was entitled to and did not hold his property. Therefore, no theft occurred under the Georgia state law.
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