Steven J. Romer - Page 18

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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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