Theft or Not????

[WhiteOleander]

Long Story

T/P inherited a house with two siblings. (three beneficiaries). House had belonged to T/P's father (deceased) and father's second wife. The second wife had a life estate in the house. The three siblings inherited the house when 2nd wife died.

The house finally sold. Each sibling to receive $100,000. The day of the closing, T/P goes to sign the papers and is told that there is a $55,000 judgement from the father that will be held from the proceeds of the house. T/P says he knows nothing of this and refuses to sign until he can investigate the situation. He lives in another town and returns home.

After he gets home, the title company calls him and says that it is all staright and they will not be deducting the judgement afterall. So, T/P agrees to sign. This time they do the signing by fax. T/P does not go to the title office. He signed the papers and faxed them back.

He received his check and it was for only $45,000. He called the title company and they would not answer him. He called an attorney. The attorney called the T/P after several days and said that the owner of the title company had tried to commit suicide and was in the hospital. He had embezelled $22 million from the company and it was now defunct.

Will this be classified as a theft? Form 4684? Or investment loss? Sch. D?

[BOB W]

I think.....

... your client needs to do more investigating on this issue. And why was only his portion reduced by $55,000. For a theft loss a police report needs to be filed, was that done? The title company has to be investigated also, that is if the call actually came from them. And the lawyer may have some questions to answer, he is supposed to make sure the deal is correct at closing.

[Brad Imsdahl]

I agree - not enough facts. You would like to think that the embezzlement is tied to the lie, and that the $55,000 withheld is theft by embezzlement. However, if in fact the father had a legitimate judgment against him, and the owner is merely guilty of lying about the judgment being cleared up, that is not theft. It is poor business. He tricked your client into going through with a deal he wasn’t ready to accept yet. To be theft, the $55,000 judgment would have to have been a lie and withholding the $55,000 from your client’s check would have to be illegal.

[jainen]

What did he sign?

What did he sign? He knew there was a lien on the property, so I wouldn't call it theft. Seems he may have a claim against the siblings and other parties, but it depends on what he signed. Most likely he would reduce the FMV of the inherited property by the amount of lien, and calculate Schedule D gain or loss from there.

[WhiteOleander]

I agree - not enough facts. You would like to think that the embezzlement is tied to the lie, and that the $55,000 withheld is theft by embezzlement. However, if in fact the father had a legitimate judgment against him, and the owner is merely guilty of lying about the judgment being cleared up, that is not theft. It is poor business. He tricked your client into going through with a deal he wasn’t ready to accept yet. To be theft, the $55,000 judgment would have to have been a lie and withholding the $55,000 from your client’s check would have to be illegal.

Yes, some of this doesn't make sense to me either.

T/P says that the entire judgement was deducted from him because he had the same name as the father. I can't really see why that would matter. The other two bene's refuse to share the loss. They will not chip in to the T/P.

The owner of the title company has been arrested for embezzlement. Out on about $70,000 bail. Has been a no show to two hearings so far.

[BOB W]

I thought the ,...

..... laywer said he tried to kill himself? Was this a long time ago?

[WhiteOleander]

..... laywer said he tried to kill himself? Was this a long time ago?

Don't have the dates in front of me. Got house in 2005. Sold in mid part of 2006.