Aha, you are right - the 30 you give the shopkeeper CAME from the shopkeeper in the first place. My mistake! (I left out the “+30” representing the “30 the shopkeeper gave you for the checkque” to balance out the "-30 you give back to the shopkeeper.)
Wow I can’t believe I got this wrong the first time.
So here’s the VERY simplest way to think of it: get 8 dimes or any other 10-unit pieces on a table in front of you with two pieces of paper labeled "shopkeeper’ and “swindler”, another one called “bad check for 30” and another one called “horse”. Finally, another piece of paper for “guy who sells you the horse” (immaterial but you need a placeholder for the dime you pay for the horse).
Give the shopkeeper 3 dimes and yourself 5 dimes to start with, the “guy selling a horse” the horse and the swinder the bad check. Now push the dimes and counters around.
At the end, the swindler has the horse counter. The “guy selling the horse” has one dime. The shopkeeper still has three dimes. That leaves you with the other four dimes. (And either you or the shopkeeper with the bad check - it doesn’t really matter.)
Starting out with 5 dimes and ending with 4 = losing one dime, or 10 (pounds).
Because the Dupe only needs to leave the house with 20 pounds to make the story work.
If he bought the horse on his way to town, gave it and ten in change to the thief in exchange for the check, then went and found a shopkeeper to cash the check, but didn’t make it out of town before it bounced and he had to pay it back, he goes home with nothing. He’s out 20 in hard cash.
I’d say he lost exactly what the scammer gained: £10 (that the scammer got in cash) plus the value of the horse.
What would his loss for tax purposes be? £10 plus horse replacement cost or £10 plus the horse’s book value which he could set at what the scammer was prepared to pay?
Without reading other responses, the horsedealer has lost a horse and £10. Any other response requires accounting, which is always somewhat subjective and/or arbitrary.
If we want to put a cash value to the horse, the last market exchange was £10. The buyer defrauded the horsedealer, so that interaction cannot established the market value. I would put the total value of the horsedealer’s losses at £20.
You guys who are trying to count the $10 of expected profit into his losses are real cutthroats. The correct answer is 20; expected profit isn’t worth a damn thing. He can buy another horse and expect profit on that - doesn’t mean he’s going to get it, obviously!
Don’t think about frames of references, or point of view, or what a horse is worth that was paid for with phoney money. That’s all just words.
Picture drawing up four columns, representing people in this series of transactions: you, the guy selling a horse (GSaH), the shopkeeper and the swindler. Your starting cash is not specified, but it’s at least 10 since you paid for a horse, so let’s say it’s 10. Similarly the shopkeeper has at least 30 so let’s call it that. And the GSaH may have money or not, but what he definitely has is a horse.
WHO HAS WHAT TO START WITH:
**GSH **=> (a horse)
**Shopkeeper **=> 30 pounds
**Swindler **=> a phony cheque for 30 pounds
**You **=> 10 pounds WHO HAS WHAT TO FINISH WITH:
**GSH **=> 10 pounds
**Shopkeeper **=> 30 pounds
**Swindler **=> (a horse)
**You **=> the phony cheque (why not frame it?)
You have no money and no horse where you used to have ten pounds. So, you’ve lost ten pounds. (Sterling, not avoirdupois.)
For US federal income tax purposes I think the horsedealer could deduct $40, $10 as a casualty loss on the theft of the horse and $30 as an ordinary and necessary business expense for making good on the check.
I went with 20 pounds (or to be absolutely correct, 10 pounds and a horse which cost 10 pounds).
Now, while the horsedealer may have also lost some potential profit, he also gained some insight into the wisdom of falling for advance fee scams and had learned never to sell a horse to a Nigerian so let’s call this part a wash.
My first answer was going to be £40 (since the dealer lost his £10 horse and £30 pounds in fake money), but after reading all the posts here, I am going to change my answer to £20: at the beginning the horsedealer had £10 in “horse money”, at the end he had -£10, total difference -£20.
But we are all missing the big picture here. The horsedealer has lost his faith in humanity, and the trust he used to grant people buying his horses. He will become a bitter and suspicious individual. The harm done to his previously cheerful and happy character will take a long time to repair, if it can ever be repaired. This cost to his soul, however unquantifiable, is greater than any monetary loss.
That’s interesting, and ties in with your earlier post:
I think that’s the sum of it. Your answer comes from your perspective as a tax guy. Mine comes from what I’d probably ask for in damages if I sued the scammer.