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Irvington Federal and petitioners so as to convert the check-kiting
scheme to a debt arrangement. Consequently, we hold that the amount
of the bounced checks--the amount of the loss Irvington Federal
sustained--must be included in petitioners' income.
We now turn to the amount that must be included in
petitioners' income; i.e., the amount of the bank's loss.
Petitioners assert that Irvington Federal suffered approximately
$170,000 in losses from petitioner's check-kiting scheme.
Respondent claims that the losses totaled $280,698. These amounts
are at the opposite ends of the range stipulated in petitioner's
plea agreement with the U.S. Attorney's Office with respect to the
cash-structuring charge.
Petitioner claims that $170,000 is the correct amount because
that is the amount reflected in the confessed judgment promissory
notes and mortgages executed by the parties in July 1988.
Additionally, petitioner testified that when he presented Mr. Ottey
with the spreadsheet of his check-kiting activity, he told Mr.
Ottey that the total losses were approximately $163,000.
Mr. Ottey testified that Irvington Federal suffered a $280,000
loss and that $170,000 represented the maximum Irvington Federal
could secure from petitioners' assets on foreclosure. Mr. Ottey
claimed that the balance of the losses, $110,000, was written off
by the bank and placed in a loss reserve account.
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