Embezzled money is taxable income of the embezzler in the year of the embezzlement under section 22(a) of the Internal Revenue Code of 1939, which defines GROSS INCOME as including "gains or profits and income derived from any source whatever" and under section 61(a) if the Internal Revenue Code of 1954, which defines gross income as "all income from whatever source derived."
It had been a well-established principle that unlawful, as well as lawful gains are comprehended within the term gross income. The obvious intent of Congress is to tax income derived from both legal and illegal sources, to remove the incongruity of having the gains of the honest laborer taxed and the gains of the dishonest immune. We do not believe that Congress intended to treat a law-breaking taxpayer differently.
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