*126 Decision will be entered under Rule 50.
Where the petitioner was the victim of the so called "Spanish prisoner" swindle and the facts were such that under the law of Mexico, the place where the swindle took place, the swindlers had committed the crime of theft, held, the petitioner is entitled to deduct the amount of his loss under the provisions of section 23 (e) (3) of the Internal Revenue Code in the taxable year 1947, the year in which the theft occurred.
*849 The respondent determined a deficiency in income tax against the petitioner for the taxable year ending December 31, 1947, in the amount of $ 7,902.14, most of which is here in controversy.
The issue before us is whether the petitioner is entitled to deduct $ 8,500 as a loss from theft in the taxable year 1947.
FINDINGS OF FACT.
The petitioner resides in New York, New York, and for the calendar year 1947 filed his Federal income tax return with the collector of internal revenue for the second district of New York.
Petitioner, a practicing physician in New *127 York City for 41 years, received a letter dated November 18, 1947, from Mexico City, Mexico, signed by one Julian Silva, stating that a party was imprisoned in Mexico City for bankruptcy and desired the petitioner's help in saving $ 375,000 in bills hidden in a secret compartment of a trunk checked in a custom house in the United States. It also stated that the party owned a suitcase containing the baggage check to the trunk and a certified bank check for $ 25,000 payable to bearer, which suitcase would be released upon payment of cost of trial, and that if the petitioner would help save the writer's fortune the writer would give petitioner one-third of the above-mentioned amounts.
Petitioner promptly replied by letter to the address given, stating that he would help if the details justified. He received a letter from Mexico City from Andres Diaz, dated December 2, 1947, stating the *850 fine and costs to be paid as $ 8,300 and that he had 35 days' time in which to pay them, at which time his suitcase would be returned to him, and urging the petitioner to come to Mexico City and pay the cost of trial and fine. To this the petitioner replied by letter dated December 7, 1947, *128 stating that he would come to Mexico City as requested.
On December 15, 1947, petitioner withdrew by two checks $ 9,000 from his bank account at the City National Bank of New York and went to Mexico City. There he met two men, one of whom posed as a prison guard acting for the man whom the petitioner intended to aid, who gave to him what purported to be a trunk check and a certified check for $ 25,000 purportedly drawn by the Bank of London & South America Limited on the Agency of National City Bank of New Orleans, Louisiana, United States of America, and accepted by it. Upon receipt of these documents the petitioner sent a telegram to New Orleans asking if check and baggage receipt were genuine and later was handed purported replies verifying the genuineness of the documents. He then, on December 22, 1947, handed the alleged guard $ 8,500 in bills, and on the same date flew to Laredo, Texas, and waited as instructed by letter.
On December 24 he received by mail an unsigned typewritten note to the effect that all was lost and instructed him to go home and await news there. The note closed with the advice, "Do not become impatient, as calm is the solution for every difficult thing." *129 The petitioner went back to New York and upon presenting the alleged certified check to the National City Bank there on December 26, 1947, he was informed that such bank had no branch in New Orleans and learned from the New York branch of the Bank of London & South America Limited that the purported certified check was a forgery.
In 1947 petitioner lost $ 8,500 by theft. This loss was not compensated for by insurance otherwise. The petitioner was the victim of the ancient "Spanish prisoner" swindle and under the laws of Mexico, Mexican Penal Code, sections 386 and 387, dealing with fraud, the facts set forth above constitute a theft of the petitioner's money.
OPINION.
The parties disagree first of all as to the existence of the loss. Our finding as to the existence of the theft is dispositive of this question.
The respondent objects to the condition of the petitioner's proof and intimates on brief that it would be possible for a taxpayer to fabricate a story such as that before us in order to place a trip to Mexico "on a paying basis." However, the petitioner's evidence is sufficient to support his case for a deduction for theft under the provisions *851 of section 23 (e)*130 (3) of the Code. The respondent, upon cross-examination, was unable to discredit the petitioner's testimony and failed to offer any independent proof discrediting the petitioner's evidence.
Whether a loss by theft occurred depends upon the law of the jurisdiction wherein it was sustained. Morris Plan Co. of St. Joseph, 42 B.T.A. 1190">42 B.T.A. 1190. The swindlers here obtained the petitioner's money by deceit, trickery, and forgery, which amounted to theft under the Mexican law. This is the controlling fact and the exact nature of the crime, whether larceny or obtaining money under false pretenses, is of little importance.
The respondent argues that, admitting the loss by theft, the petitioner is not entitled to a deduction under the provisions of section 23 (e) (3) for the reason that to permit the loss would contravene public policy. This reasoning is based upon the respondent's contention that the petitioner here was involved in an illegal scheme. We have no evidence before us to support the respondent's position that the petitioner was involved in any illegal scheme. Respondent failed to introduce any evidence of the law of Mexico upon this point and had*131 he done so we are not certain that his position could be sustained. Section 23 (e) (3) and its accompanying regulations do not prohibit a deduction otherwise allowable by reason of theft on the grounds that to allow the deduction would violate or frustrate public policy. See Lilly v. Commissioner, 343 U.S. 90">343 U.S. 90, 96 L. Ed. 769">96 L. Ed. 769, 72 S. Ct. 497">72 S. Ct. 497.
We therefore hold that the petitioner is entitled to deduct $ 8,500 as a loss incurred by theft under the provisions of section 23 (e) (3) of the Internal Revenue Code.
Decision will be entered under Rule 50.