UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

SHAHRAM GOUHARI; CELESIA
GOUHARI; SHAHRIAR GOHARI; SARAH
G. GOHARI,
Plaintiffs-Appellants,
                                                                     No. 98-2381
v.

UNITED STATES OF AMERICA,
Defendant-Appellee.

Appeal from the United States District Court
for the District of Maryland, at Greenbelt.
Deborah K. Chasanow, District Judge.
(CA-96-576-DKC)

Argued: May 5, 1999

Decided: June 7, 1999

Before NIEMEYER, MICHAEL, and TRAXLER, Circuit Judges.

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Affirmed by unpublished per curiam opinion.

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COUNSEL

ARGUED: Charles Michael Tobin, Bobby L. Dexter, HOPKINS &
SUTTER, Washington, D.C., for Appellants. Patricia McDonald
Bowman, Tax Division, UNITED STATES DEPARTMENT OF
JUSTICE, Washington, D.C., for Appellee. ON BRIEF: Loretta C.
Argrett, Assistant Attorney General, Richard Farber, Lynne A. Bat-
taglia, United States Attorney, UNITED STATES DEPARTMENT
OF JUSTICE, Washington, D.C., for Appellee.
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

PER CURIAM:

The plaintiffs, Shahram and Celesia Gouhari and Shahriar and
Sarah Gohari, seek refunds of amounts paid for federal income
taxes.* They claim a business loss deduction for the expropriation by
the Iranian government of property inherited by Shahram Gouhari and
Shahriar Gohari from their father, General Reza Gohari. After a non-
jury trial, the district court rejected the refund claims. We affirm.

I.

General Gohari was a high-ranking officer in SAVAK, the Iranian
secret police under the Shah. He was also a substantial landowner in
pre-revolutionary Iran. He fled the country in 1978, before the Shah
was deposed by the Ayatollah Khomeini in 1979. The general died in
exile in 1987.

After the revolution, agents of the Gohari family continued to man-
age the family's property holdings until the Spring of 1980. At that
time, control of the property was taken over by the Bonyad, an orga-
nization of the revolutionary government. The Gohari family never
regained control of the property.

From July 1981 to August 1982 several revolutionary courts and
prosecutors issued competing indictments against General Gohari. It
appears that some of those proceedings may have resulted in orders
of confiscation against his property. In May 1983 the First Branch of
the Central Revolutionary Court found General Gohari guilty of hold-
ing a high office in SAVAK and of looting the national treasury. The
First Branch instructed the Office of the Public Prosecutor to "order
_________________________________________________________________
*Although they spell their last names differently, Shahram Gouhari
and Shahriar Gohari are brothers.

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all the movable and immovable properties of [General Gohari] to be
identified and recorded until the necessary decision regarding the total
sum that should be returned to the treasury can be adopted."

The First Branch, the Office of the Public Prosecutor, and the
Bonyad subsequently determined that they lacked the authority to
confiscate General Gohari's property. The matter was therefore
referred to the Eleventh Branch of the Islamic Revolution Courts
(Special Economic Division). In December 1991 that court issued a
"Final and Binding" order of "confiscation of all the movable and
immovable properties remaining from [General Gohari] and his first
degree relatives that have received properties from him." It declared
that because all the prior proceedings had been interlocutory, they
were now null and void.

The plaintiffs, who live in the United States, claimed a federal
income tax deduction for the loss of the Iranian properties that
Shahram Gouhari and Shahriar Gohari inherited from their father. The
Internal Revenue Code permits a deduction for certain losses that are
not compensated for by insurance or otherwise. 26 U.S.C. § 165. For
individual taxpayers, they are limited to (1) losses incurred in a trade
or business, (2) losses incurred in a transaction entered into for profit,
and (3) losses from casualty or theft. 26 U.S.C.§ 165(c). Because
expropriation is not a casualty loss or theft, the plaintiffs must estab-
lish that their losses were either incurred in a trade or business or in
a for-profit transaction. Powers v. Commissioner , 36 T.C. 1191, 1193
(1961). They contend that although the Bonyad took control of the
property in 1980, the Gohari family continued to own the property
until the Eleventh Branch issued a final confiscation order in Decem-
ber 1991. They argue that until the Eleventh Branch issued its final
order, they had a reasonable expectation of recovering the property.

The district court rejected the plaintiffs' claims. It noted that con-
fiscation for tax purposes occurs when the taxpayer is actually
deprived of the benefits of ownership. See United States v. S.S. White
Dental Mfg. Co., 274 U.S. 398, 402-03 (1927). The court found that
General Gohari lost possession and control of the Iranian properties
in 1980 and had no realistic hope of collecting any further revenues
from them. It reasoned that the plaintiffs therefore did not inherit out-
right ownership to the property in 1987, but merely some nominal

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property interest in the confiscated land. The district court concluded
that this property interest was neither an asset held in a trade or busi-
ness nor an investment entered into for profit. It therefore ruled that
the plaintiffs did not prove their entitlement to the loss deduction.

II.

After considering the parties' briefs, their oral arguments, and the
record, we conclude that the district court correctly decided the issues
before it. Accordingly, we affirm on the reasoning of the district
court. See Gouhari v. United States, No. DKC 96-576 (D. Md. Aug.
5, 1998).

AFFIRMED

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