Here is a fact pattern. In this discussion, you tell me whether this is based on a real case, or whether I am making it up to prove a point.

John Notsoslick was working as a bank teller and attending college. He embezzled $30,000 from the bank to fund a drug deal, but planned to put the money back in the till before the bank noticed by using part of the profits from the drug deal. He gave the embezzled money to two accomplices who would use it to buy the drugs. When he met his crime partners they had neither the drugs nor the money and claimed they were robbed at gunpoint. Notsoslick winds up in prison and realizes his crime partners had ripped him off. When Notsoslick filed his tax return, he reports the $30,000 of stolen funds as taxable income and claimed a theft loss of $29,900, citing Section 165. Truth or Fiction? Would the IRS tax Notsoslick on the embezzled funds? Would they allow the deduction?