Opinion ID: 4537743
Heading Depth: 2
Heading Rank: 3

Heading: The Adkinses’ Federal Income Tax Returns

Text: While the criminal proceedings were pending, the Adkinses attempted to recoup some of their losses by claiming a federal income tax deduction. Id. at 309. Pursuant to section 165 of the Internal Revenue Code, taxpayers are permitted to deduct a theft loss from their income in the year that they sustained the loss. Id.; 26 U.S.C. § 165(a), (e) (2000); Treas. Reg. §§ 1.165-1(a), (d), 1.165-8(a) (2001). The Adkinses claimed their theft loss for the 2004 taxable year, and then carried back portions of their loss to the previous three years. Adkins II, 140 Fed. Cl. at 309. Accordingly, in 2006, the Adkinses timely filed federal income tax returns reflecting a total theft loss of $2,118,725. Id. The Adkinses sought income tax refunds of $115,736 for 2004; $24,021 for 2003; $71,621 for 2002; and $177,707 for 2001. Id. On April 5, 2011, an IRS Appeals Officer concluded that, pending the final computations of the Tax Computation Specialist, the Adkinses had sustained a theft loss, and were entitled to a deduction for the 2004 tax year. J.A. 1343 ¶ 58. The Appeals Officer determined that the Adkinses had incurred a theft loss of $2,532,996.01 in 2004. Id. at ¶ 59. The proposed settlement, however, was never Case: 19-1356 Document: 37 Page: 13 Filed: 05/29/2020 ADKINS v. UNITED STATES 13 finalized. Adkins II, 140 Fed. Cl. at 310. As reflected in the IRS Appeals Officer’s memorandum and attached transmittal form, the IRS Office of Appeals lacked jurisdiction to settle the Adkinses’ claim because the Adkinses had filed suit in the United States Court of Federal Claims before their appeal was complete. Id. The Adkinses explained that they were forced to seek reimbursement in this new venue because they feared that their IRS claim would be precluded due to the statute of limitations if they did not move forward. See Adkins v. United States, No. 161961, Oral Arg. at 31:16–31:40, available at http:// oralarguments.cafc.uscourts.gov/default.aspx?fl=20161961.mp3 (“The IRS looked at this, and Mr. Kaplan [the Appeals Officer] was ready to grant the refund, but the statute of limitations ran out and we had to file in court.”).