- 35 -- 35 -
as a misappropriation, those deposits may nonetheless constitute
income to petitioners. Section 61(a) defines gross income to
include income from whatever source derived, including all
accessions to wealth over which a taxpayer has complete dominion.
Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 431 (1955). A
taxpayer must include in gross income funds obtained "lawfully or
unlawfully, without the consensual recognition, express or
implied, of an obligation to repay and without restriction as to
their disposition". James v. United States, supra at 219. Funds
so obtained are includible in the taxpayer's income even though
the taxpayer may still be required to return such funds.23 Id.
On the record before us, we reject petitioners' contention
that they held for corporate (i.e., K & H's) purposes the depos-
its of K & H's and Ms. Velilla's funds. To support their
contention with respect to the deposits at issue of K & H's
funds, petitioners rely on petitioner's testimony and the stipu-
lations that petitioners made certain payments to, or on behalf
of, K & H during each of the years at issue.24 We question the
23 A taxpayer's income is reduced for any year by the amount of
funds that were obtained by the taxpayer and included in the
taxpayer's income under the principles of James v. United States,
366 U.S. 213 (1961), and that the taxpayer repays in such year.
24 Although petitioners suggest on brief that certain financial
transactions may have taken place during 1991 between petitioner
and K & H that impact resolution of the issue whether petitioners
have unreported income for each of the years 1989 and 1990
resulting from the deposits that were not returned during each of
those years, neither petitioner nor Mr. Kabeiseman testified
(continued...)
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