Phillip A. O'Bryon and Cyndie W. O'Bryon - Page 12

                                       - 12 -                                         
          Thereafter, he operated the scheme through his wholly owned S               
          corporation, the O'Bryon Co.  As part of the scheme, Phillip sold           
          nonexistent certificates of deposit (CD's) to various                       
          individuals.  Phillip used the funds he received in the scheme to           
          pay individuals who thought they owned CD's that had matured, to            
          finance his other businesses, and to pay for his personal                   
               On March 30, 1995, Phillip was charged with grand theft                
          under Ohio law.  The prosecution alleged that Phillip had                   
          operated a fraudulent Ponzi scheme involving fictitious CD's.               
          Phillip pleaded guilty to the charges.  On April 28, 1995, the              
          State court judge sentenced Phillip to 2 years in prison and                
          ordered him to pay $468,834 in restitution to the individuals he            
          had defrauded.                                                              
               In the notice of deficiency, respondent determined that                
          petitioners failed to report embezzlement income of $423,850 for            
          1992, $289,578 for 1993, and $46,700 for 1994.                              
               In the petition, petitioners asserted that respondent erred            
          in determining that Phillip received funds by illegal means in              
          the amounts set forth in the notice of deficiency.  Petitioners             
          asserted that the money Phillip received in the Ponzi scheme was            
          not includable in his gross income.  Petitioners asserted in the            
          alternative that, if the money did constitute gross income, then            
          petitioners should be allowed a deduction under section 162 in              

Page:  Previous  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  Next

Last modified: May 25, 2011