Stephens v. Commissioner

905 F.2d 667 (1990)

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Stephens v. Commissioner

United States Court of Appeals for the Second Circuit
905 F.2d 667 (1990)

Facts

Jon Stephens (plaintiff) was convicted by a jury on multiple criminal charges in connection with a plot to defraud Raytheon Corporation. In the course of the scheme, Stephens embezzled $530,000 from Raytheon. Stephens was sentenced in December 1982 as follows: on multiple counts of wire fraud, Stephens was sentenced to a concurrent five-year prison sentence and $1,000 fine; on one count of conspiracy, Stephens was sentenced to a concurrent five-year prison sentence and $10,000 fine; on one count of interstate transportation of the proceeds of fraud, Stephens was sentenced to a consecutive five-year prison term and $5,000 fine, but the prison term was suspended on the condition that Stephens pay $1,000,000 in restitution to Raytheon. The $1,000,000 represented the $530,000 Stephens embezzled plus interest. In 1976, Stephens was taxed on the $530,000. In 1984, in connection with civil lawsuits brought by Raytheon, Stephens paid Raytheon $530,000 and executed a promissory note for $470,000 in interest to settle the claims. On an amended tax return for 1984, Stephens deducted $530,000 for the restitution payment to Raytheon. The commissioner of internal revenue (defendant) disallowed the deduction, and Stephens appealed to the tax court. The tax court agreed with the commissioner. Stephens appealed.

Rule of Law

Issue

Holding and Reasoning (Conboy, J.)

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