Raymond Mazzei (plaintiff) and his brother owned a sheet-metal company. One of the company’s employees introduced Mazzei to a man who claimed to be able to counterfeit money. The counterfeiter demonstrated the process to Mazzei. However, the process was entirely deceptive, and no money was actually reproduced. Mazzei believed that this process worked, and eventually arranged another meeting to copy $25,000. The $25,000 was taken entirely from the company’s accounts. At the meeting, the counterfeiter staged a fake police raid, and the counterfeiter and fake policemen escaped with the $25,000. Mazzei deducted this amount from his taxes as a theft loss. The commissioner of internal revenue (commissioner) (defendant) disallowed this deduction and issued a deficiency against Mazzei. Mazzei filed a petition challenging the commissioner’s disallowance in the United States Tax Court.