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and ruled that James was liable for the federal income tax that was due on his embezzled funds. The Court also ruled, however, that Eugene James could not be held liable for the willful tax evasion because it is not possible to violate laws willfully that were not established at the time of the
415:
Although Eugene James avoided criminal liability, the
Supreme Court left James in a situation In which he would be required not only to repay the embezzled $ 738,000 to the union but also to pay federal income taxes on the receipt of those funds, just as if he had been able to keep them.
310:
proceeds is not taxable to the borrower because of the borrower's corresponding obligation to repay the loan, the person who embezzles money should not be treated as having received income since that person is legally required to return those funds to their rightful owner.
1226:
352:, the receipt of embezzled funds was included in the gross income of the wrongdoer and was taxable to the wrongdoer even though the wrongdoer was required to return the funds to the rightful owner.
364:, joined by Justices Brennan and Stewart. That opinion held that if a taxpayer receives income legally or illegally without consensual recognition of obligation to repay, the income is taxable.
403:
but contending that James should have been set for a new trial, rather than set free of criminal liability. Justice Clark wrote a brief concurrence, also agreeing with the overruling of
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Justice
Whittaker, joined by Justice Black and Justice Douglas, wrote an opinion concurring in the dismissal of the indictment against James but dissenting from the overruling of
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375:. The absence of the "lawful" modifier indicated that the framers of the Sixteenth Amendment had intended no safe harbor for illegal income. The Court expressly overruled
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The
Supreme Court was called upon to determine whether the receipt of embezzled funds was income taxable to the wrongdoer, despite an obligation to repay.
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even though the law might require the taxpayer to repay the ill-gotten gains to the person from whom they had been taken.
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and claimed in his defense that embezzled funds were not taxable income. His argument was that just as the receipt of
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The Court was divided between several different rationales. The majority opinion was written by Chief
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Justice Harlan, joined by
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more than $ 738,000 in union funds, and did not report the amounts on his tax return. He was
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The
Supreme Court ruled that under section 22(a) of the Internal Revenue Code of 1939 and
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Indeed, Eugene James pointed out that the
Supreme Court had made such a determination in
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was not limited to "lawful" income, a distinction that had been found in the
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Certiorari to the United States Court of
Appeals for the Seventh Circuit
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but also stating that James's conviction should have been upheld.
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that the ruling was a preemption of state criminal jurisdiction.
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Ill-gotten gains are taxable income even if they must be repaid.
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324:, which Eugene James and sentenced him to three years in
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United States
Supreme Court cases of the Warren Court
431:
List of United States
Supreme Court cases, volume 366
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290:The defendant, Eugene James, was an official in a
889:Continental Tie & Lumber Co. v. United States
276:receipt of money obtained by a taxpayer illegally
881:Texas & Pacific Railway Co. v. United States
90:) ¶ 9449; 7 A.F.T.R.2d (RIA) 1361; 1961-2 C.B. 9
426:Taxation of illegal income in the United States
270:, 366 U.S. 213 (1961), was a case in which the
937:General American Investors Co. v. Commissioner
620:
320:. However, the defense was unavailing in the
8:
1232:United States taxation and revenue case law
627:
613:
605:
20:
796:Merchants' Loan & Trust v. Smietanka
687:Stratton's Independence, Ltd. v. Howbert
1180:United States v. General Dynamics Corp.
1004:United States v. Safety Car Heating Co.
442:
1132:Helvering v. Independent Life Ins. Co.
392:. Justice Black raised an argument on
367:The Court noted that the scope of the
530:James v. United States (366 U.S. 213)
18:1961 United States Supreme Court case
7:
1164:Hoover Express Co. v. United States
1108:Brushaber v. Union Pacific Railroad
652:Brushaber v. Union Pacific Railroad
230:Whittaker, joined by Black, Douglas
1156:Tank Truck Rentals v. Commissioner
1116:Burnet v. Sanford & Brooks Co.
945:Commissioner v. Gillette Motor Co.
929:Commissioner v. Glenshaw Glass Co.
913:Helvering v. Northwest Steel Mills
198:Warren, joined by Brennan, Stewart
36:Supreme Court of the United States
14:
1222:United States Supreme Court cases
636:United States Sixteenth Amendment
547:213 (1961) is available from:
660:Stanton v. Baltic Mining Company
523:
29:
1148:Millinery Corp. v. Commissioner
1124:McLaughlin v. Alliance Ins. Co.
873:Burk-Waggoner Assoc. v. Hopkins
1237:1961 in United States case law
921:Crane-Johnson Co. v. Helvering
1:
1199:Bowers v. Kerbaugh-Empire Co.
905:Helvering v. National Grocery
711:Bowers v. Kerbaugh-Empire Co.
350:Internal Revenue Code of 1954
222:Harlan, joined by Frankfurter
788:Rockefeller v. United States
748:Southern Pacific Co. v. Lowe
668:Tyee Realty Co. v. Anderson
272:United States Supreme Court
1258:
1172:Cammarano v. United States
597:Oyez (oral argument audio)
86:2014; 61-1 U.S. Tax Cas. (
1063:United States v. Sullivan
804:Miles v. Safe Deposit Co.
384:Concurrences and dissents
239:
123:
113:
28:
1079:Commissioner v. Sullivan
865:Edwards v. Cuba Railroad
780:United States v. Phellis
206:Black, joined by Douglas
43:Argued November 17, 1960
1071:Rutkin v. United States
1087:James v. United States
1036:United States v. Davis
719:Moore v. United States
537:James v. United States
474:Commissioner v. Wilcox
450:James v. United States
377:Commissioner v. Wilcox
317:Commissioner v. Wilcox
267:James v. United States
245:U.S. Const. amend. XVI
170:William J. Brennan Jr.
54:James v. United States
24:James v. United States
1044:Commissioner v. Tufts
1028:Crane v. Commissioner
897:Helvering v. Mitchell
836:Koshland v. Helvering
828:Marr v. United States
1140:Helvering v. Winmill
174:Charles E. Whittaker
45:Decided May 15, 1961
964:Goodrich v. Edwards
844:Helvering v. Gowran
732:corporate dividends
588:Library of Congress
373:Revenue Act of 1913
369:Sixteenth Amendment
1191:Diminution of loss
1020:Helvering v. Horst
1012:Helvering v. Bruun
988:Lucas v. Alexander
857:corporate earnings
812:Cullinan v. Walker
772:Eisner v. Macomber
703:Eisner v. Macomber
150:William O. Douglas
134:Associate Justices
78:81 S. Ct. 1052; 6
1209:
1208:
972:Walsh v. Brewster
764:Peabody v. Eisner
528:Works related to
263:
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162:John M. Harlan II
146:Felix Frankfurter
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996:Burnet v. Harmel
740:Lynch v. Turrish
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1055:Unlawful income
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756:Lynch v. Hornby
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158:Tom C. Clark
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96:Case history
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380:violation.
362:Earl Warren
322:trial court
304:tax evasion
292:labor union
249:I.R.C. § 61
241:U.S. Const.
130:Earl Warren
1216:Categories
1098:Deductions
437:References
394:federalism
138:Hugo Black
84:U.S. LEXIS
82:246; 1961
503:26 U.S.C.
411:Aftermath
356:Rationale
296:embezzled
257:§ 61
195:Plurality
80:L. Ed. 2d
60:Citations
638:case law
535:Text of
420:See also
294:who had
855:Taxable
730:Taxable
561:Findlaw
348:of the
340:Holding
109:Holding
1202:(1926)
1183:(1987)
1175:(1959)
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1143:(1938)
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679:Income
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405:Wilcox
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332:Issue
300:tried
286:Facts
214:Clark
101:Prior
545:U.S.
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458:U.S.
308:loan
302:for
278:was
73:more
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88:CCH
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