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return. Accordingly, your taxable income
is increased $886,000.00.
OPINION
The issues in this case grow out of the fact that
in August 1989, petitioner deposited four worthless checks
totaling $886,026 into his account at Colonial Bank.
Petitioner had drawn the worthless checks to his order on
the account of his wholly owned corporation, Motion, Inc.,
at another bank. Relying on those deposits, Colonial Bank
paid four other checks that petitioner had drawn in the
same approximate amount. Petitioner thereby fraudulently
obtained approximately $886,000 from Colonial Bank. When
officials of the bank became aware that the checks
deposited into petitioner's account had been drawn on an
account in which there were insufficient funds to pay them,
Colonial Bank made a criminal referral of the check-kiting
scheme to the Office of the Comptroller of the Currency and
other Federal authorities, and it filed suit against
petitioner, and Motion, Inc., to recover the amount of its
loss. Subsequently, petitioner pled guilty to two counts
of violating 18 U.S.C. sec. 1344, relating to bank fraud.
In the notice of deficiency at issue in this case,
respondent determined that petitioner had realized taxable
income in the amount of $886,000, the proceeds of
petitioner's fraud against Colonial Bank. Petitioners
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