                        T.C. Memo. 2009-255


                      UNITED STATES TAX COURT



              DOMINICK J. VINCENTINI, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent*



     Docket No. 7166-03.               Filed November 9, 2009.



     Robert J. Stientjes and Anthony Scott Gasaway, for

petitioner.

     A. Gary Begun, for respondent.


                 SUPPLEMENTAL MEMORANDUM OPINION


     MARVEL, Judge:   This case is before the Court on

petitioner’s motions to vacate decision pursuant to Rule 1621 and


     *
      This opinion supplements our previously filed opinion in
Vincentini v. Commissioner, T.C. Memo. 2008-271.
     1
      Unless otherwise indicated, all Rule references are to the
                                                   (continued...)
                               - 2 -

to reconsider our Memorandum Opinion in Vincentini v.

Commissioner, T.C. Memo. 2008-271 (Vincentini I), pursuant to

Rule 161.   We granted petitioner’s motion to vacate decision in

order to consider and rule on petitioner’s motion to reconsider

our Memorandum Opinion.   For the reasons that follow, we shall

deny petitioner’s motion to reconsider.

                            Background

     In Vincentini I we made findings of fact, which we

incorporate herein by reference.   For convenience and clarity, we

repeat below the facts relevant to our disposition of

petitioner’s motion for reconsideration, and we supplement those

facts as appropriate to provide a complete background statement.

     From 1999 to 2001 petitioner was an investor in Anderson Ark

& Associates (Anderson Ark), an international fraud scheme that

marketed various phoney investment programs.   In 2001 agents of

the Costa Rican and U.S. Governments raided Anderson Ark’s

offices in Costa Rica and the United States and arrested and

indicted several Anderson Ark principals (Anderson Ark

defendants).   In 2004 the Anderson Ark defendants were convicted

in the U.S. District Court for the Western District of Washington

(Washington District Court) of conspiracy to defraud the United


     1
      (...continued)
Tax Court Rules of Practice and Procedure, and all section
references are to the Internal Revenue Code for the relevant
year.
                                - 3 -

States, conspiracy to commit mail and wire fraud, aiding and

assisting the filing of false income tax returns, mail fraud, and

wire fraud.    Two of the Anderson Ark defendants, Keith and Wayne

Anderson, also were convicted of international money laundering

and conspiracy to commit money laundering.    The Anderson Ark

defendants were each sentenced to as many as 20 years in prison.

     In 2005 the Washington District Court entered amended

judgments in the criminal case.    In the amended judgments, the

Washington District Court ordered the Anderson Ark defendants to

pay restitution to petitioner and other investors.    The

restitution order with respect to petitioner was as follows:

                                        Restitution1
         Defendant           CBO Program        Loan Four Program

Keith Anderson                 $76,500               $435,000
Wayne Anderson                  76,500                435,000
Richard Marks                   76,500                   -
Karolyn Grosnickle              76,500                   -
Pamela Moran                    76,500                   -
James Moran                     76,500                   -
     1
      The Anderson Ark defendants are jointly and severally
liable.

     The Washington District Court ordered Keith and Wayne

Anderson to forfeit seven condominiums in Costa Rica, a residence

in Hoodsport, Washington, and $28 million in cash.    The

Washington District Court also ordered Pamela and James Moran to

forfeit property as set forth in a preliminary order of

forfeiture.
                                 - 4 -

     On April 14, 2006, while petitioner’s case was pending

before this Court, petitioner submitted to the Internal Revenue

Service (IRS) a Form 1040X, Amended U.S. Individual Income Tax

Return, for 1999.     On Form 4684, Casualties and Thefts, which was

attached to the Form 1040X, petitioner claimed for the first time

an $835,000 theft loss deduction related to his involvement with

Anderson Ark,2 and he asserted that he sustained the theft loss

in 2001 or 2002 and could carry it back to 1999.    Petitioner also

filed a motion for leave to amend his petition to assert his

claim to a theft loss deduction.    We ultimately granted

petitioner’s motion to amend.

     At trial petitioner testified that he invested in two

Anderson Ark programs, but he did not introduce any documentation

of his investments.    Petitioner also testified that in the spring

of 2001, after learning that Government agents had raided

Anderson Ark’s headquarters and arrested the Anderson Ark

defendants, he filled out forms seeking recovery of his

investments and participated in a conference call to discuss with

other investors whether it was worthwhile to retain an attorney

to try to recover the money he had invested with Anderson Ark.

Petitioner testified that he ultimately decided not to hire an


     2
      Petitioner argued at trial and on brief that he was
entitled to a $511,500 theft loss deduction. In Vincentini I, we
concluded that petitioner had abandoned his claim to a theft loss
deduction greater than $511,500.
                                - 5 -

attorney because no one knew where the money was and he believed

hiring an attorney would be a waste of money.    Although

petitioner did not assert a claim for a theft loss deduction

until after the Anderson Ark defendants had been convicted,

sentenced, and ordered to pay restitution and forfeit assets, he

did not introduce any evidence regarding the likelihood that he

would receive restitution in accordance with the amended

judgments entered by the Washington District Court.

                             Discussion

I.   Standard of Review

     The purpose of reconsideration under Rule 161 is to correct

substantial errors of fact or law and to allow the introduction

of newly discovered evidence that the moving party could not have

introduced, by the exercise of due diligence, in the prior

proceeding.    Estate of Quick v. Commissioner, 110 T.C. 440, 441

(1998), supplementing 110 T.C. 172 (1998); Goettee v.

Commissioner, T.C. Memo. 2004-9, supplementing T.C. Memo. 2003-

43, affd. 192 Fed. Appx. 212 (4th Cir. 2006).    We have discretion

to grant a motion for reconsideration and will not do so unless

the moving party shows unusual circumstances or substantial

error.    Estate of Quick v. Commissioner, supra at 441; Vaughn v.

Commissioner, 87 T.C. 164, 166-167 (1986), modifying 81 T.C. 893

(1983).    “Reconsideration is not the appropriate forum for

rehashing previously rejected legal arguments or tendering new
                               - 6 -

legal theories to reach the end result desired by the moving

party.”   Estate of Quick v. Commissioner, supra at 441-442.

II.   Section 165 Theft Loss

      Section 165 generally permits a taxpayer to deduct

uncompensated losses resulting from theft in the year in which

the taxpayer discovers the loss.    Sec. 165(a), (c), (e).   To

qualify for a theft loss deduction, a taxpayer must prove:     (1)

The occurrence of a theft under the law of the jurisdiction in

which the claimed loss occurred, Monteleone v. Commissioner, 34

T.C. 688, 692 (1960); (2) the amount of the theft loss, Gerstell

v. Commissioner, 46 T.C. 161, 175 (1966); and (3) the date the

taxpayer discovered the theft loss, sec. 165(e); McKinley v.

Commissioner, 34 T.C. 59, 63 (1960); see also River City Ranches

#1, Ltd. v. Commissioner, T.C. Memo. 2003-150, affd. in part,

revd. in part and remanded 401 F.3d 1136 (9th Cir. 2005); Yates

v. Commissioner, T.C. Memo. 1988-565.

III. Reasonable Prospect of Recovery

      A taxpayer may deduct a theft loss only for the year the

loss is sustained.   Sec. 165(a).   A theft loss is treated as

sustained during the taxable year in which the loss occurs, as

evidenced by a closed and completed transaction.    Sec.

1.165-1(d)(1), Income Tax Regs.; see also Garcia v. Commissioner,

96 T.C. 792, 795 (1991).   Whether there is a closed and completed

transaction depends on the taxpayer’s prospect of recovering the
                               - 7 -

loss.   Jeppsen v. Commissioner, T.C. Memo. 1995-342, affd. 128

F.3d 1410 (10th Cir. 1997); sec. 1.165-1(d)(2)(i), Income Tax

Regs.   If in the year of discovery there exists a claim for

reimbursement with respect to which there is a reasonable

prospect of recovery, no portion of the loss with respect to

which reimbursement may be received is sustained until the year

in which it can be ascertained with reasonable certainty whether

such reimbursement will be received.   Jeppsen v. Commissioner,

supra; sec. 1.165-1(d)(3), Income Tax Regs.   Stated differently,

a reasonable prospect of recovery will postpone the theft loss

deduction until such time as the prospect no longer exists.     See

sec. 1.165-1(d)(3), Income Tax Regs.

     In Vincentini I we concluded petitioner had suffered a theft

loss of $511,500 and that the loss was discovered in 2001.     We

denied petitioner’s theft loss deduction, however, because

petitioner did not prove that he had no reasonable prospect of

recovery as of the end of 2001 or 2002.   As we stated in

Vincentini I:

          The only evidence offered by petitioner regarding
     his analysis of his prospect of recovery in 2001 was
     petitioner’s uncorroborated testimony that he made some
     attempts to recover his money. * * *

          In contrast, the objective facts established by
     the record present a more refined picture. In 2001
     several Anderson Ark defendants were arrested and
     indicted. We find that it was reasonably foreseeable
     at the end of 2001 that the Anderson Ark defendants
     would be convicted of various charges related to
     Anderson Ark’s schemes. We also find that it was
                               - 8 -

     reasonable in 2001 to anticipate that the Washington
     District Court might order the Anderson Ark defendants,
     if convicted, to pay restitution to their victims,
     including petitioner, and to forfeit to the United
     States property that could be used to satisfy the
     restitution order. * * * Petitioner did not testify
     about the status of any recovery under the restitution
     order, nor did he offer any evidence about the effect
     of the substantial forfeitures on his right to
     restitution. This lack of evidence is particularly
     telling because one of the conditions of supervised
     release imposed on the Anderson Ark defendants after
     their release from imprisonment was satisfaction of
     their restitution obligation.

     Petitioner disputes our finding that he had a reasonable

prospect of recovery as of the end of 2001 or, in the

alternative, 2002.   In his motion for reconsideration, petitioner

argues that:   (1) The likelihood of recovery was not 40 percent

or greater, (2) this Court’s reliance on the Washington District

Court’s restitution order was misplaced, and (3) this Court’s

reliance on petitioner’s failure to provide testimony regarding

any receipt of funds under the restitution order was improper.

     A.   Petitioner’s Evidence Insufficient for This Court To
          Conclude His Prospect of Recovery Was Not Reasonable

     Whether a reasonable prospect of recovery exists is a

question of fact that must be determined by examining all facts

and circumstances.   Sec. 1.165-1(d)(2)(i), Income Tax Regs.   A

reasonable prospect of recovery exists when the taxpayer has a

bona fide claim for recoupment from third parties or otherwise

and there is a substantial possibility such claims will be

decided in the taxpayer’s favor.   Ramsay Scarlett & Co. v.
                               - 9 -

Commissioner, 61 T.C. 795, 811 (1974), affd. 521 F.2d 786 (4th

Cir. 1975).   Conversely, a reasonable prospect of recovery does

not exist where there is evidence that the person against whom

recovery is sought has insufficient assets to satisfy the claim.

Mann v. Commissioner, T.C. Memo. 1981-684 (theft loss allowed

where taxpayer had no reasonable prospect of recovery but

nevertheless filed lawsuit out of anger against former employee

who had embezzled funds).   If a taxpayer’s prospect of recovery

is simply unknowable as of the end of the year for which the

deduction is claimed, the taxpayer is not entitled to a theft

loss deduction in that year.   Jeppsen v. Commissioner, supra.

     The test for determining whether a reasonable prospect of

recovery exists is primarily an objective one.     Ramsay Scarlett &

Co. v. Commissioner, supra at 811.     A taxpayer’s subjective

belief that there was no reasonable prospect of recovery is

entitled to some weight, but it is not the sole or even a

controlling factor.   Id. at 812-813.

     Although petitioner’s argument is not entirely clear,

petitioner appears to contend that we erred in analyzing whether

petitioner had a reasonable prospect of recovery.    Citing only

one case, Parmelee Transp. Co. v. United States, 173 Ct. Cl. 139,

154, 351 F.2d 619, 628 (1965), petitioner states that “The courts

hold that in order for a taxpayer to have a reasonable prospect

of recovery, the chance of recovery should be 40 percent or
                              - 10 -

better.”   Petitioner asserts that he did not have a reasonable

prospect of recovery because he did not have a 40-percent-or-

better chance of recovering his theft loss under the amended

judgments.

     We reject petitioner’s argument for several reasons.   As an

initial matter, petitioner has failed to convince us that “the

courts” have adopted any uniform standard for quantifying whether

a taxpayer’s prospect of recovery is reasonable.3   Moreover, even


     3
      In Parmelee Transp. Co. v. United States, 173 Ct. Cl. 139,
156, 351 F.2d 619, 629 (1965), the Court of Claims held that the
plaintiff-taxpayer was not entitled to an ordinary loss deduction
where the plaintiff had an antitrust lawsuit pending with respect
to the claimed loss, and the outcome of the lawsuit was unknown
as of the date the plaintiff deducted the loss. The Court of
Claims explained that the mere existence of a pending claim does
not necessarily establish that a taxpayer has a reasonable
prospect of recovery:

     There are many reasons for initiating lawsuits. In
     this case, taxpayer’s antitrust claim for treble
     damages exceeded 19 million dollars. Where the stakes
     are so high, a suit may be “100% justified” even though
     the probability of recovery is minuscule. In short,
     although we offer no litmus paper test of “reasonable
     prospect of recovery,” we note that the inquiry should
     be directed to the probability of recovery as opposed
     to the mere possibility. Analyzing the rule in
     percentage terms, we would consider a 40 to 50 percent
     or better chance of recovery as being “reasonable”. A
     lawsuit might well be justified by a 10 percent chance.

Id. at 154, 351 F.2d at 628. Parmelee is distinguishable in that
the Court of Claims was considering the existence of a reasonable
prospect of recovery in the context of ongoing litigation
regarding the taxpayer’s loss, whereas in this case the
Washington District Court has already ordered restitution with
respect to petitioner’s theft loss. Moreover, the Court of
Claims stated that it was offering no litmus test of a taxpayer’s
                                                   (continued...)
                             - 11 -

if we were to accept petitioner’s contention that a reasonable

prospect of recovery means a chance of recovery that is 40

percent or better, petitioner did not satisfy his burden of

proving that his prospect for recovery under the restitution

portion of the amended judgments was less than 40 percent or that

his prospect of recovery was not reasonable either as of 2001,

the year of discovery, or in the alternative in 2006, the year in

which petitioner first asserted his claim to a theft loss

deduction.

     Petitioner offered no evidence whatsoever regarding the

status of any restitution payments, the availability of funds

from the substantial forfeitures that the Washington District

Court had ordered, or whether petitioner had received or would

receive any restitution; nor did petitioner introduce any

credible evidence that the Anderson Ark defendants were judgment

proof, that they had insufficient assets to satisfy the

restitution orders, that the forfeitures did not occur as

ordered, or that it was otherwise improbable that he would



     3
      (...continued)
reasonable prospect of recovery. We are aware of only one other
case that suggests a “reasonable prospect of recovery”
necessarily requires a 40- to 50-percent chance of recovery. See
Sollitt Constr. Co. v. United States, 1 Cl. Ct. 333, 345 (1983).
While Parmelee may support petitioner’s argument that the Court
of Claims established a standard for deciding when pending
litigation may constitute a reasonable prospect for recovery, it
does not support petitioner’s generalization that “the courts”
generally and unanimously have adopted such a standard.
                             - 12 -

receive restitution pursuant to the restitution orders.

Petitioner’s only evidence on this point at trial was his

testimony, which was vague, self-serving, unreliable, and

completely unsupported by documentation.

     Although petitioner attempts to inject a modicum of

information into the record through representations in the motion

for reconsideration, a motion for reconsideration is not the

mechanism to rectify a failure of proof at trial.   Estate of

Quick v. Commissioner, 110 T.C. at 441-442.   Because petitioner

failed to prove that he did not have a reasonable prospect of

recovery in either 2001 or in 2006 when he claimed the theft loss

deduction for the first time, we properly held that petitioner

was not entitled to a theft loss deduction for 2001 that could be

carried back to 1999.

     B.   Our Reliance on the Washington District Court’s
          Restitution Order Not Misplaced

     Petitioner argues that our reliance on the Washington

District Court’s restitution order was not justified because

“The potential to receive restitution payments in 20 years is not

a reasonable prospect of recovery within the meaning of [section

1.165-1(d), Income Tax Regs.]”.   Petitioner does not cite any

authority to support his assertion that the potential to receive

restitution at a future date is not a reasonable prospect of

recovery, nor are we aware of any authority holding that a

taxpayer with a valid claim for restitution does not have a
                                - 13 -

reasonable prospect of recovery merely because the taxpayer may

be unable to collect on the claim for some time.

     Even if we were to accept petitioner’s argument that a right

to receive restitution payments in 20 years is not a reasonable

prospect of recovery, the argument would still fail because

petitioner failed to prove that restitution would be delayed for

20 years or that it would not be made at all.    As we stated in

Vincentini I, the Washington District Court ordered various

defendants to forfeit substantial assets, which may be sold or

otherwise converted to cash to fund restitution payments.

Petitioner knew or should have known of the forfeiture and

restitution provisions of the amended judgment when he submitted

his 1999 Form 1040X to the IRS in 2006.    He was certainly aware

of the amended judgments before trial, and he could have obtained

and offered evidence regarding the status of the asset

forfeitures and the payment of restitution.    He did not do so.

     C.   Our Reliance on Petitioner’s Failure To Provide
          Testimony Regarding Any Receipt of Funds Under the
          Restitution Order Not Improper

     Petitioner argues that this Court improperly relied on

petitioner’s failure to provide testimony regarding any receipt

of funds under the restitution order.    We reject petitioner’s

argument for several reasons.    First, petitioner had the burden

of proof at trial, see Rule 142(a), and evidence that petitioner

had not received any funds under the restitution order was
                              - 14 -

readily available at the time of trial.   Petitioner did not offer

it. Second, even if petitioner had offered evidence that he had

not   received any payment under the restitution order as of the

date of trial, such evidence would not have been sufficient to

prove that petitioner had no reasonable prospect of recovery.4

      The amended judgments containing the restitution and

forfeiture orders were admitted into evidence as stipulated

Exhibits 48-R through 51-R, 54-R, and 55-R.   Petitioner cannot

now complain that we erred in considering the amended judgments

in analyzing whether he satisfied his burden of proof.

IV.   Conclusion

      Petitioner has failed to demonstrate any unusual

circumstances or substantial errors of fact or law that would

justify the granting of the instant motion for reconsideration.

Accordingly, we shall deny petitioner’s motion for

reconsideration.

      We have considered all remaining arguments made by the

parties and, to the extent not discussed above, find those

arguments to be irrelevant, moot, or without merit.




      4
      Petitioner did not introduce any evidence that, for
example, the Anderson Ark defendants were judgment proof or that
the defendants had insufficient assets to make the required
restitution payments. See, e.g., Mann v. Commissioner, T.C.
Memo. 1981-684.
                        - 15 -

To reflect the foregoing,


                                 An appropriate order and

                            decision will be entered.
