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increase in the deficiency for 1987 attributable to the
amendments to respondent's answer. Rule 142(a).
Embezzlement Income
Section 61 defines gross income as income from whatever
source derived. Property is includable in gross income when, by
lawful or unlawful means, the taxpayer gains complete dominion
and control over it, thereby realizing an economic benefit.
United States v. Curtis, 782 F.2d 593, 595-596 (6th Cir. 1986);
Davis v. United States, 226 F.2d 331, 334 (6th Cir. 1955).
Income realized through embezzlement must be reported in the year
of receipt, even though restitution may be required in a later
year. James v. United States, 366 U.S. 213, 219-220 (1961). The
evidence establishes that petitioner received Lawrence's three
checks for $65,000 under false pretenses and converted them to
his own use by depositing them into bank accounts over which he
exercised complete dominion and control. His disposition of the
funds entrusted to him was plainly inconsistent with the pretense
that he possessed them as authorized agent of CEA. Consequently,
these funds constitute taxable income to him for 1986.
Petitioner contends that, inasmuch as he has never been
charged with or convicted of embezzlement, respondent may not
treat the funds he received from Lawrence as embezzlement income.
The decision of the district attorney for Nassau County to charge
petitioner with crimes other than embezzlement is likely to have
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