An Tax Court order was released in Swartz v. Commissioner. Swartz worked for Tyco and during his time there proceeded to steal $12.5 million through loan write-offs. A criminal case arose from the theft and Mr. Swartz was found guilty of theft.
The IRS used the criminal conviction to assert that Mr. Swartz had $12.5 million of income in the year he stole the money. The Tax Court found that he was collaterally estopped from arguing that he did not receive the $12.5 million. Under IRC 61(a), income from criminal endeavors are considered taxable income.
This case brings up a big issue for tax practitioners. When representing a client, there can often be many different things that can be affected by a single decision. Here, Mr. Swartz may have had a chance to settle his criminal case out of court. If he had, then he would not have been collaterally estopped from arguing he did not receive the income and may have avoided a hefty tax bill.
Relevant Cites: Tax Court order, Mark H. Swartz, Docket No. 3583-10
No comments:
Post a Comment