The decision in The Case of The Lost Figurines came down to one question: Was the taxpayer telling the truth? The taxpayer, a stockbroker, set forth this story: While on vacation in South Africa, he saw 16 Japanese ivory figurines in an antique shop. He offered to pay $24,000 for the set, but did not put up the money immediately. Instead, the antique dealer let him take the figurines to Hong Kong, where the two met a few weeks later; the taxpayer then paid the $24,000 in cash. Two years later, the figurines were stolen from his apartment in New York; the theft was reported to the police, but nothing was recovered. On his next income tax return, the taxpayer deducted $23,900 as a casualty loss.
The IRS replied as follows: the taxpayer did not file a customs declaration for any figurines when he returned from his trip to South America and Hong Kong. He has no bill of sale for the $24,000 purchase. He said the document has been lost; when asked to obtain a duplicate, he said he had forgotten the name of the antique dealer. Since the taxpayer cannot prove the value of the figurines, he should get no deduction.
The Tax Court found this one easy. The taxpayer's story "verges on the incredible," the judge said. " . . . there is no probative evidence . . . that the figurine set ever existed." Deduction disallowed. (Rosenfeld v. Comm'r.)