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the corporation or its creditors satisfies the shareholder’s
liability and therefore serves a shareholder rather than a
corporate purpose, we think the exception provided in Leaf v.
Commissioner, 33 T.C. 1093 (1960), for wrongfully appropriated
funds that are returned within the same year would be nullified.
Mr. Leaf received a criminal conviction for taking funds from his
insolvent corporation, but he was not taxable on the amounts
returned in the year of the taking. Respondent’s argument
regarding the satisfaction of petitioner’s personal liabilities
to Northwest is inconsistent with the holding in Leaf, and we
accordingly reject it.
On this record, respondent has not shown that the funds in
the ANB accounts were held in 1988, or ultimately used in 1991,
to satisfy petitioner’s, as opposed to his corporations’,
obligations to Northwest.
As a consequence, we find that the deposit of funds into
accounts subject to the TRO represented a deployment of the funds
for corporate purposes. The ANB accounts and the Sam Han account
were subject to the TRO. As a result, no transfer or other
disposition of the funds in the accounts could be made without
Northwest’s or the court’s authorization. The TRO was granted
upon a showing that Northwest had a substantial likelihood of
prevailing in its claim that the accounts contained proceeds from
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