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Constr. Corp., 456 U.S. 461, 481-485 (1982); Bertoli v.
Commissioner, 103 T.C. 501, 507-508 (1994).
Alternatively, with respect to the embezzlement income that
is covered by the State court order of restitution and by
petitioner's obligation to reimburse the New York State Lawyers’
Fund for Client Protection, petitioner argues that such
embezzlement income should not be taxable to him but that it
should be treated as having been converted into a nontaxable debt
obligation. While it is true that restitution of embezzled funds
may give rise to an ordinary deduction for the embezzler in the
year of repayment, James v. United States, supra at 220, such
possible deduction in the year of repayment does not affect the
requirement that the embezzled funds be included in income in the
year of receipt. In any event, petitioner has not repaid any of
the embezzled funds.
With respect to the $350,000 that petitioner obtained
through his check-kiting scheme and the $575,000 that petitioner
obtained by forging Goldman's signature on checks written on the
New Gold account, petitioner claims that his acknowledgment of
his obligation to repay these funds requires that all of these
funds now be treated in his hands as nontaxable loan proceeds.
As explained, however, by the Court of Appeals for the Second
Circuit in Collins v. Commissioner, 3 F.3d at 631:
Loans are identified by the mutual understanding between the
borrower and lender of the obligation to repay and a bona
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