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Gordon Case
Katherine and Richard Gordon (the Gordons) were shareholders
in Omni and made other investments in entities closely associated
with husband. In 1985, the Gordons brought suit in State court
to recover losses incurred through the fraudulent activities of
husband, Omni, and other entities controlled by him. Judgments
from these suits (the State court judgments) exceeded $1 million.
In 1994, the Gordons filed suit in the U.S. District Court
for the Middle District of Florida (the District Court suit and
the District Court, respectively) to execute on the $450,000 cash
bail. Petitioner was a defendant in the District Court suit.
Among the findings made by the District Court were the following:
“The * * * [1994 conviction] involved the same facts
and circumstances for which the Plaintiffs obtained
their judgment[s] [the state court judgments], i.e.,
failing to pay taxes on the money Mr. Mueller stole
from investors such as the Plaintiffs. * * * The
Trust [trust] is funded by money fraudulently conveyed
to it by Reinhard and Christa-Karin Mueller.”
The District Court held, among other things, that the cash
bail was subject to execution by the Gordons.
OPINION
I. Deficiency in Tax
A. Introduction
We must first determine whether respondent erred by
including in petitioner and husband’s gross income embezzlement
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