A fuller recitation of the facts can be found in the court's most recent merits decision. See Adkins v. United States, 140 Fed.Cl. 297 (2018), rev'd, 960 F.3d 1352 (Fed. Cir. 2020). Because attempts to recover their losses from the perpetrators of the fraud were unsuccessful, plaintiffs sought to recoup some of those losses by claiming a federal income tax deduction.

Petitioners argue that there was no prospect of recovery of Metro Gem's investments at the close of 2008 because (1) PCI was insolvent; (2) the Government was seeking a forfeiture order that would result in seizure of all assets owned by PCI and Petters; (3) PCI's bankruptcy trustee filed "claw back" actions against Metro Gem which would offset and eliminate any possible restitution that Metro Gem might have received from PCI; and (4) petitioner's subjective understanding as the CEO and sole shareholder of Metro Gem was that in 2008 Metro Gem had "no chance" of recovering its losses from PCI. In Adkins v. United States, 960 F.3d 1352, 1363 (Fed. Cir. 2020), the Court of Appeals held that "[t]he governing statute and regulations do not require affirmative proof that a taxpayer's loss will never be recovered", and uncertainty at the time of deduction does not "foreclose a showing of 'no reasonable prospect of recovery.'" In support of their argument that no reasonable prospect of recovery existed at the close of 2008, petitioners contend that this case is "entirely on point" with the Adkins decision in which the Court of Appeals held that the taxpayer did not have a reasonable prospect of recovery.

The Claims Court's interpretation of regulations, like all of its legal determinations, is subject to de novo review. See Adkins v. United States , 960 F.3d 1352, 1361 (Fed. Cir. 2020). We think that the Claims Court erred in finding that there was a forfeiture because the issue had been briefed in connection with the motion to dismiss and the Claims Court converted the motion to dismiss into a motion for summary judgment.