Court Opinion

ID: 9444286
Source: CourtListenerOpinion
Date Created: 2023-08-03 20:55:06.426431+00
Date Added: 2024-06-11T17:29:47.784146
License: Public Domain

JOHNSEN, Circuit Judge
(concurring specially).
I don’t think anyone can be absolutely sure, on the basis of the Rutkin case, 343 U.S. 130, 72 S.Ct. 571, 96 L.Ed. 833, and the Wilcox case, 327 U.S. 404, 66 S.Ct. 546, 90 L.Ed. 752, just what the law objectively is on the general question that is here involved.
In the Rutkin case, the Court seems to have analogized extortion into the category of fraud, for tax purposes, saying that “it would be an extraordinary result to hold here that petitioner is to be tax free because his fraud was so transparent that it did not mislead his victim and his victim paid him the money because of fear instead of fraud.” 343 U.S. at page 138, 72 S.Ct. at page 576.
The use of such a broad analogy would make it possible to regard any funds criminally acquired from another— whether through extortion, embezzlement, larceny, robbery, burglary or other similar means — as constituting in a sufficient sense fraud proceeds, to entitle them to be so treated in their tax consequence. But if the Court intended this to be the significance of the Rutkin case, there would have been no occasion for it to have left the Wilcox case standing as one of tax non-liability, and to say of it, as it did in the Rutkin opinion, supra, ibid., that “We limit that [embezzlement] case to its facts.”
If the Rutkin case and the Wilcox case are not inconsistent, there must exist some basis on which to distinguish the difference in the treatment of the funds involved. Is there any distinction that can be made between them in relation to the use and enjoyment which Rutkin and Wilcox respectively had of the illegally acquired funds? There is none. Each had the full use and enjoyment of the funds in terms of economic value. Did the Court then, mean to imply that there was a difference by virtue of the fact that in the Rutkin case, as in a fraud situation, the victim had himself turned over the money to the criminal for the latter’s use, while in the Wilcox case he had not?
That difference would have the effect of making a holdup man subject to income tax, who permitted his victim to hand over his bill-fold, while leaving without tax liability one who compelled his victim to put his hands in the air and himself engaged in stripping the victim’s pockets. Certainly Rutkin’s victim, who testified that he paid the extortion funds to protect himself and his family from the danger of being shot, 343 U.S. at page 134, 72 S.Ct. at pages 573, 574, was not any more voluntarily or willingly doing so than would be a holdup victim in gladly handing over his bill-fold to save his life. The fact therefore that in the Rutkin case the victim had turned over the money to the criminal as the latter’s own, and in the Wilcox case he had not, does not, in my opinion, afford any rational basis for distinguishing the two cases in their tax consequences.
If criminally acquired funds are at all to be subjected to tax liability — and I think they should be, just as much as any other economic gains, both as a tax matter and as a matter of justice and of deterrence in either individual or organized crime — that liability, it seems to me, can only and needs only to be predicated upon the simple and solid basis under the statute of actual economic gain, value and enjoyment having existed to the criminal. One who acquires funds by criminal means and uses them for his own purposes has had no less measure of economic gain, value and enjoyment from them than the law-abiding citizen can hope to obtain from the funds which he acquires in honest pursuits.
*640Tax liability necessarily is an economic not a moral question. No prostitute, narcotics peddler, or anyone else can escape the payment of income tax upon any earnings on moral grounds. No more should an embezzler, a thief, a robber, a burglar, or any other criminal be permitted to go tax-free or be immune from prosecution for evasion, upon the moral or legal basis that the money which he acquired was not technically his own but his victim’s, as against the economic realities of the funds having been taken by him with intent to appropriate and enjoy them as his own, with such utilization and enjoyment actually having been made of them by him, and with him thus being left in the position of not being able to restore them as the identical object taken. As a tax matter, when these economic realities have existed, it also cannot affect the situation, I think, that the criminal may be able and may undertake, after he has been caught up with, to pay back the amount of his illegal acquisition, in funds not constituting the identical object which he took.
I have always felt that our decision in Kurrle v. Helvering, 8 Cir., 126 F.2d 723, which preceded the Wilcox case, was sound, and that of necessity there would ultimately have to come a return to that position. The Rutkin case is not capable of any practicable application or workability, if it is to be used merely to make artificial refinements in fact situations to escape the Wilcox case. And so I would not rest our decision in the present case on any narrow line of demarcation between whether appellant had an immedi-’ ate or a deferred obligation to account for the funds which he collected. In either event, he misappropriated the funds, and the economic gain, value and enjoyment which he received resulted from the fact of that misappropriation.
I would affirm the conviction and sentence here upon the general basis which I have discussed above. The Rutkin ease and any other attempt to impose tax liability for economic gain and enjoyment from criminally acquired funds can only soundly be made to rest on that ground.