holding that repayment of embezzled funds is an expense deductible under 26 U.S.C. § 165 (c)(2)
How later courts described this case
- holding that repayment of embezzled funds is an expense deductible under 26 U.S.C. § 165 (c)(2)
- no unrestricted right to money received as a result of fraudulent insurance claims
- "Furthermore, 26 U.S.C. section 1341 does not apply to a taxpayer who has embezzled or otherwise knowingly misappropriated funds which he is later required to return because the taxpayer never had an unrestricted right to the money so obtained."
- non-moving party may not simply rely upon its pleadings
Written by the judges who cited it.
The opinion
MERRITT, Chief Judge,
concurring.
I concur basically in the reasons stated in Judge Contie’s opinion for denying the Krafts’ petition for a refund. I find the most clearly reasoned and persuasive case *300 on this subject to be Perez v. United States, 553 F.Supp. 558 (M.D.Fla.1982). There the president of a corporation who pled guilty to mail fraud and as a condition of parole was required to make restitution for kickbacks was not allowed a loss deduction for the amounts paid in satisfaction of the restitution requirement. That case appears to be directly in point. In a clear opinion by Judge Krentzman, the court reviewed the legislative history and development of § 1341. It shows that Congress enacted this section in order to overrule the case of United States v. Lewis 340 U.S. 590 , 71 S.Ct. 522 , 95 L.Ed. 560 (1951). It also shows that in enacting § 1341 Congress did not intend to overrule the “claim of right” doctrine. The court concluded “that Congress could not have intended to extend 1341 to embezzlers, for their income was not even taxable in 1954.” 553 F.Supp. at 561 . Thus for the reasons stated in Judge Contie’s opinion and for the reasons stated in the Perez opinion, I would affirm the judgment of the District Court.