CyberKey Solutions fka CKYS

[5cap]

THEFT LOSS VS. CAPITAL LOSS

http://findarticles.com/p/articles/mi_m0ICC/is_3_73/ai_n6332561

"A taxpayer who claims a theft-loss deduction must first establish that the loss resulted from theft. The definition of "theft" for federal income tax purposes is found in Edwards v. Bromberg, 232 F. 2d 107 (5th Cir. 1956), where the court defined it as a word of general and broad connotation, intended to cover 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.

For Sec. 165 to be applicable, there must be a specific intent to defraud. The taxpayer needs to have purchased the investment from the person or agent of the seller, or entity who made the misrepresentations or committed the malfeasance. If the client simply engages in a standard open-market transaction, such as purchasing a publicly traded security, and there was no criminal intent, it probably does not qualify for the theft-loss deduction.

In the case of a standard open-market transaction, where a loss is a result of an illegal act by management, the seller would have to have been privy to the fraudulent nature of the investment for the transaction to be executed with criminal intent. If a broker makes reckless statements, circulates half-truths, false opinions or predictions, then the transaction may qualify for this treatment."

So if you have come to the conclusion that the cyberkey scam does not fall under IRS section 165, then this will surely get you upset:

http://www.stockbrokerfraudblog.com/2009/03/madoff_and_stanford_victims_ca.html