Court Brief

Court Brief

Donald R., and Joyce D. Schroerlucke v. United States, 108 AFTR 2d 2011-6379 (2011)

FACTS

Plaintiffs, Donald Schroerlucke -former Vice President of Operations at Long Distance Discount Services (LDDS) and its predecessor corporation World Com- and his wife Joyce Schroerlucke filed a complaint in the United States Court of Appeals alleging that they were due a tax refund for unreimbursed losses for tax years 1997-1999 and 2002. The plaintiffs are residents of the State of Georgia. Donald Schroerlucke accumulated employee stock options grants between July 1991 and January 1998.

Prior to leaving WorldCom on January 4, 1999, Mr. Schroerlucke had accumulated 172,492 World Com stock options, valued at $13,702,333.25. On February 12, 1999, Mr. Schroerlucke exercised all of his existing stock options and shortly thereafter, sold 75,374 shares of WorldCom for $6,082,586.07 and paid WorldCom $1,834,856.47 and taxes of $4,228.847.50. The remaining 97,118, valued at $7,714,811.12 was deposited into Mr. Schroerlucke's brokerage account and by the end of February the stock value increased to $8,012,235.00.

In year 2002, Mr. Schroerlucke began selling WorldCom shares. On May 1, 2002, he sold 80,000 shares for $175,189.30, tax basis was $4,302,498.70 netting in a loss of $4,127,309.00; sold 1,242 shares for $2,093.35 on May 24, 2002, tax basis was $66,796.29, netting a loss of $64,702.94; sold 47,516 shares for $6,124.39 on September 12, 2002, tax basis was $2,555,469.11, netting a loss of $2,549,344.72. Plaintiffs reported a $6,741,358.30 net long-term capital loss on their 2002 tax return and received the maximum capitol loss deduction $3,000. On April 7, 2006, plaintiffs amended their 2002 tax return to reflect a theft loss claim under the provisions of 26 U.S.C. § 165(2006) and received a refund