- 14 -
F.2d 216, 219-220 (6th. Cir. 1955), affg. in part, revg. and
remanding in part a Memorandum Opinion of this Court; Axelrod v.
Commissioner, T.C. Memo. 1982-92, affd. without published opinion
711 F.2d 1062 (9th Cir. 1983).
Most of the underpayment determined by respondent for 1983
arises from alleged embezzlement income. Embezzled funds, once
reduced to a taxpayer's complete dominion and control, are income
to the taxpayer. James v. United States, 366 U.S. 213 (1961).
However, as we have said:
The Supreme Court's decision in James v. United
States, supra, firmly established the principle that
embezzled funds are income to the embezzler. That
decision, however, does not stand for the proposition
that all misappropriated funds are gross income of the
person who illegally misapplied the funds. The
decision necessarily confines taxation of an embezzler
to circumstances where the embezzler receives a
sufficiently cognizable benefit under the normal
principles of income taxation.
The Court referred to its oft-quoted language
describing the breadth of Congress' intent regarding
the statutory definition of gross income: all
"'accessions to wealth, clearly realized, and over
which the taxpayers have complete dominion and
control'." James v. United States, supra at 219
(quoting Commissioner v. Glenshaw Glass Co., 348 U.S.
426, 431 (1955)). The Court refined this definition by
noting that such gain exists when the "recipient has
such control over it that, as a practical matter, he
derives readily realizable economic value from it."
James v. United States, supra at 219 (quoting Rutkin v.
United States, 343 U.S. 130, 137 (1952)). [Hobson v.
Commissioner, T.C. Memo. 1992-312.]
Jewelry Purchased From F&M
Respondent has not persuaded us by proffering clear and
convincing evidence that the Renaissance payment to F&M was not
Page: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 NextLast modified: May 25, 2011