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Respondent seeks summary judgment that the deficiencies and
additions to tax determined in the notice of deficiency and
amended answer be sustained. The first issue is whether peti-
tioner is liable for the deficiencies. The deficiencies are in
the amounts of $2,269, $27,458, and $5,998 for the taxable years
1990, 1991, and 1992. The deficiencies arose because petitioner
failed to file Federal income tax returns and report gross income
for the taxable years 1990, 1991, and 1992 in the amounts of
$20,436, $107,301, and $27,381, as determined in the notice of
deficiency.
Section 61 defines gross income as income from whatever
source derived. The Supreme Court has held that, when earnings
are acquired, lawfully or unlawfully, without a consensual recog-
nition of an obligation to repay and without restriction on their
disposition, there is income to the taxpayer even though he may
be required to pay restitution at a later date. James v. United
States, 366 U.S. 213, 219 (1961). This proposition has been
extended to cover situations where the taxpayer "obtained loans
in bad faith without an intent to repay them," as well as where
the taxpayer obtained money by embezzlement, as in the James
case. United States v. Swallow, 511 F.2d 514, 519-520 (10th Cir.
1975). The evidence establishes that petitioner received wage
and interest income of $20,436 in 1990. In 1991, petitioner
received $92,000 of embezzlement income as well as wage and
interest income of $15,301. Further, the evidence establishes
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