Wilcox v. Commissioner of Internal Revenue

Decision Date30 March 1945
Docket NumberNo. 10895.,10895.
PartiesWILCOX et al. v. COMMISSIONER OF INTERNAL REVENUE.
CourtU.S. Court of Appeals — Ninth Circuit

Edward F. Lunsford and Bert M. Goldwater, both of Reno, Nev., for petitioners.

Samuel O. Clark, Jr., Asst. Atty. Gen., and Sewall Key, A. F. Prescott, Miriam Lashley, and Muriel Paul, Sp. Assts. to the Atty. Gen., for respondent.

Before DENMAN, HEALY, and BONE, Circuit Judges.

DENMAN, Circuit Judge.

This is a review of decision of the Tax Court holding that an embezzler of moneys derives income from such moneys under Section 22 of the Internal Revenue Code, 26 U.S.C.A. Int.Rev.Code, § 22, providing

"Sec. 22. Gross income

"(a) General definition. `Gross Income' includes gains, profits, and income derived from salaries, wages, or compensation for personal service (including personal service as an officer or employee of a State, or any political subdivision thereof, or any agency or instrumentality of any one or more of the foregoing), of whatever kind and in whatever form paid, or from professions, vocations, trades, businesses, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in such property; also from interest, rent, dividends, securities, or the transaction of any business carried on for gain or profit, or gains or profits and income derived from any source whatever. * * *"

and that such embezzled funds constitute a part of the embezzler's taxable gross income.

Laird Wilcox, one of the petitioners, hereafter called Wilcox, entered the employ of the Nevada Transfer & Warehouse Co., a Nevada corporation, in December 1937, in the capacity of bookkeeper and continued in its employ until 1942. During his employment, Wilcox received a regular salary, payable semi-monthly, and was not allowed to draw his salary in advance and was paid his salary promptly as and when due. It is stipulated that at no time during that period of employment was the employer indebted to Wilcox other than for his salary which was currently paid.

In June 1942, when the books of the Nevada Transfer & Warehouse Co. were audited, it was discovered for the first time that Wilcox had converted to his own use between June 1941 and up to and including June 20, 1942, a total sum of $22,896.01, of which sum $12,748.60, now in controversy, was taken by him between and including June 1941 and December 31, 1941. The $12,748.60 was composed entirely of miscellaneous sums of money belonging to the Nevada Transfer & Warehouse Co. and received and collected by Wilcox in his capacity of bookkeeper. He withheld the money which he had so embezzled from his employer and then used the money for gambling, losing practically all of it in different gambling houses in Reno, Nevada.

And information was filed against Wilcox for the crime of such embezzlement in the Second Judicial District Court of the State of Nevada, in and for the County of Washoe, on July 20, 1942. On the same day the information was filed he was arraigned and entered a plea of guilty as charged. On July 21, 1942, he was sentenced to not less than two nor more than fourteen years' imprisonment in the State Penitentiary at Carson City, Nevada. He served time in the penitentiary on this sentence until paroled in December 1943.

The taking of the moneys by Wilcox from the Nevada Transfer & Warehouse Co. has never been condoned or forgiven by the employer and it always has and now does hold him liable to restore the same. Wilcox at no time claimed, nor could have claimed, that he took or held the moneys under any claim of right.

It is agreed that after the appropriation of the moneys there were no "dealings in the property" embezzled by which there were "gains" or "profits" within section 22, supra. The sole question is whether the embezzled moneys per se are to Wilcox "gains or profits and income derived from any source whatever" under that section.

The crime of embezzlement in Nevada is complete when the embezzler "uses or appropriates such money * * * in any manner, or for any other purpose, than that for which the same was * * * intrusted." State v. Trolson, 21 Nev. 419, 425, 427, 32 P. 930, 931. Here the record shows that the appropriation for gambling purposes occurred at the taking of the moneys.

Under the law of Nevada the employer here could have replevined the embezzled moneys in the possession of the embezzler as soon as he appropriated them. Sec. 8681, Nevada Compiled Laws, 1929; Perkins v. Barnes, 3 Nev. 557; Studebaker Co. v. Witcher, 44 Nev. 468, 471, 199 P. 477, 201 P. 322. Also under the Nevada law an embezzler is liable to the party from whom the property is appropriated...

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9 cases
  • James v. United States
    • United States
    • United States Supreme Court
    • May 15, 1961
    ...United States v. Sullivan, 274 U.S. 259, 263, 47 S.Ct. 607, 71 L.Ed. 1037. 6. 327 U.S. at page 408, 66 S.Ct. at page 549. 7. Wilcox v. Commissioner, 148 F.2d 933. 8. 127 F.2d 572. 9. 126 F.2d 723. 10. 127 F.2d at page 573. 11. Ibid. The same reasoning can be found in our opinion in Alison v......
  • Beck v. United States, 16424.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • February 14, 1962
    ...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 o......
  • Commissioner of Internal Revenue v. Wilcox
    • United States
    • United States Supreme Court
    • February 25, 1946
    ...in that year and asserted a tax deficiency of $2,978.09. The Tax Court sustained the Commissioner but the court below reversed. 9 Cir., 148 F.2d 933. We granted certiorari, 326 U.S. 701, 66 S.Ct. 35, because of a conflict among circuits as to the taxability of embezzled Section 22(a) of the......
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    • United States Courts of Appeals. United States Court of Appeals (2nd Circuit)
    • April 24, 1945
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