- 77 -
testified in this proceeding that petitioner’s attorney’s actions
with respect to the ANB accounts were at all times consistent
with his custodial function.
Second, the cases that have considered the exception for the
repayment of taken funds within the same taxable year have
countenanced a range of circumstances as constituting repayment
or return. In Leaf v. Commissioner, supra, the sole shareholder-
taxpayer had taken funds from his insolvent corporation. After
the corporation’s creditors filed an involuntary bankruptcy
petition against it and within the same year as the taking, the
taxpayer “repaid to * * * [the corporation] or its creditors” a
portion of the funds. Id. at 1095. We held the shareholder was
taxable only on the funds “not returned to the corporation or its
creditors” in the year of the taking. Id. at 1096; see also Mais
v. Commissioner, 51 T.C. 494, 499 (1968) (dicta) (portion of
embezzled funds turned over in year of embezzlement to third
party to be held for victim not taxable); Stovall v.
Commissioner, T.C. Memo. 1983-450 (shareholder’s diversions from
corporation not taxable to extent used in year of diversion to
purchase certificates of deposit in corporation’s name). We are
mindful that the Court of Appeals for the Seventh Circuit, to
which an appeal in this case would ordinarily lie, has for
purposes of the same-year repayment exception distinguished
Page: Previous 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 NextLast modified: May 25, 2011