Facts:
Your friend stole the money from his employer last year and he promised he would pay back them all with interest, however, you don’t know he returned or not. And now he is searching for some ways to exclude the amount from his taxable income.
Question:
• Whether the $175,000 is illegal or not
• Whether the $175,00 is taxable or not
• If your friend paid them back with interest, is there any way to exclude the amount from taxable income.
• Is there any way to deduct the taxable income if the amount is taxable
Options:
• Report the embezzle founds into other income and we could find way to deduct his interest expense
• Do not report into taxable income and he might get into trouble
Laws:
1. Rev. Rul. 82-74, 1982-1 CB 110 -- IRC Sec(s). 1001Revenue Rulings (1954 - Present) (RIA) Section 162(a)(2) disallows deductions under section 162(a) for payments that are illegal under any law of the United States or any state (if it is generally enforced) that subjects the payor to a criminal penalty.
2. …show more content…
AOD 1978-25 -- IRC Sec(s). 61, 07/07/1977 Actions on Decisions (1967 - Present) (RIA) In James v. United States, supra, the Supreme Court held the embezzled funds are taxable to the recipient in the year of embezzlement, even though the recipient has no bona fide claim of right to the
Your friend stole the money from his employer last year and he promised he would pay back them all with interest, however, you don’t know he returned or not. And now he is searching for some ways to exclude the amount from his taxable income.
Question:
• Whether the $175,000 is illegal or not
• Whether the $175,00 is taxable or not
• If your friend paid them back with interest, is there any way to exclude the amount from taxable income.
• Is there any way to deduct the taxable income if the amount is taxable
Options:
• Report the embezzle founds into other income and we could find way to deduct his interest expense
• Do not report into taxable income and he might get into trouble
Laws:
1. Rev. Rul. 82-74, 1982-1 CB 110 -- IRC Sec(s). 1001Revenue Rulings (1954 - Present) (RIA) Section 162(a)(2) disallows deductions under section 162(a) for payments that are illegal under any law of the United States or any state (if it is generally enforced) that subjects the payor to a criminal penalty.
2. …show more content…
AOD 1978-25 -- IRC Sec(s). 61, 07/07/1977 Actions on Decisions (1967 - Present) (RIA) In James v. United States, supra, the Supreme Court held the embezzled funds are taxable to the recipient in the year of embezzlement, even though the recipient has no bona fide claim of right to the