David D. Beck, A/K/A Dave Beck v. United States

The taxability of embezzled funds has been the subject of legal dispute for several years. This court in 1945, under certain limited facts, held that when an embezzler takes money from an employer with no conceivable claim or colorable claim of right to it, it at no time becomes a taxable “gain” or “profit” or “income” to the embezzler, within the definition of “gross income” as defined in Section 22 of the Internal Revenue Code of 1939 ( 26 U.S.C. § 22 ). Wilcox v. Commissioner, 9 Cir. 1945, 148 F.2d 933 . This court agreed with the fifth circuit opinion of McKnight v. Commissioner, 1942, 127 F.2d 572 , which in turn relied on language used in North American Oil Consolidated v. Burnet, 1932, 286 U.S. 417, 424 , 52 S.Ct. 613 , 76 L.Ed. 1197 . Our opinion distinguished the holding in Helvering v. Clifford, 1940, 309 U.S. 331 , 60 S.Ct. 554 , 84 L.Ed. 788 .

This court’s decision was upheld in Commissioner of Internal Revenue v. Wilcox, 1946, 327 U.S. 404 , 66 S.Ct. 546 , 90 L.Ed. 752 , wherein the Supreme Court ruled:

that “ * * * the bare receipt of property or money wholly belonging to another lacks the essential characteristics of a gain or profit * * * ” ( 327 U.S. at 408 , 66…