Frank C. Howard and Nancy Howard v. United States

Plaintiffs, Frank C. Howard and Nancy Howard, filed a joint income tax return for the year 1965 in which they claimed a $99,900.00 theft loss. 1 26 U.S.C. § 165. The Internal Revenue Service investigated this claim, but made no objection before the statute of limitations ran. 2 Plaintiffs then sought a refund for the years 1962 and 1963 on the ground that the 1965 loss created a net operating loss carryback. 26 U.S.C. § 172. This time, however, the IRS determined that plaintiffs’ 1965 loss was occasioned by a nonbusiness bad debt, 26 U.S.C. § 166, and not by theft; thus, it denied the refund.…