- 18 -
“restoration to another” means a restoration resulting
because it was established after the close of such
prior taxable year (or years) that the taxpayer did not
have an unrestricted right to such item (or portion
thereof).
Section 1341 is titled “CLAIM OF RIGHT”, but the statutory
language used to describe that concept is that the income item
must have been includable because it “appeared” that the taxpayer
had an “unrestricted right” to it. (Emphasis added.) The above-
quoted regulations, however, again use the term “claim of right”
in the process of defining the operative terms of section 1341.
The concept of claim of right, accordingly, must be part of our
consideration of section 1341 issues.
Respondent contends that petitioner is not entitled to use
section 1341 because: (1) Petitioner never included the proceeds
of the illegal sale of insider information in his gross income
for 1987; (2) petitioner did not have an unrestricted right to
the income; i.e., in cases usually involving embezzlement, courts
have held that the illegal income is not held under a claim of
right; and (3) in general, illegally obtained income does not,
per se, give rise to a claim of right. Petitioner disagrees with
respondent’s contentions and argues that Barrett v. Commissioner,
96 T.C. 713 (1991), a case involving a securities trader who was
allowed section 1341 relief, is substantially similar factually
and should be followed.
Page: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 NextLast modified: May 25, 2011