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income of $485,177 and stock-related gain of $2,299,920, both
items attributable to husband. We conclude that respondent erred
only in that the stock-related gain was $911,795 rather than
$2,299,920. Petitioner and husband made a joint return of income
for 1986 and, thus, barring relief under section 6015, petitioner
is jointly and severally liable for any deficiency in tax
resulting from respondent’s adjustments. See sec. 6013(d)(3).
B. Embezzlement Income
Husband was convicted of tax evasion on account of his
failure to report and pay tax for 1986 on income resulting to him
from his conversion of the DTC liquidating distribution. DTC had
obtained summary judgment against husband in the amount of
$496,437.50, which, after garnishment in the amount of
$10,259.50, left a balance due of $486,178. There is sufficient
evidence for us to find that husband had unreported income in the
amount of $485,177 on account of his conversion of the DTC
liquidating distribution in 1986.2 See James v. United States,
366 U.S. 213, 220 (1961) (embezzled funds constitute gross income
to embezzler in year funds were misappropriated).
2 Respondent’s adjustment for embezzlement income is based
on the Aug. 19, 1986, withdrawal of $485,177.37 from the Meritor
account.
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