A U.S. Consulate officer in Vietnam was charged with conspiracy after participating in a scheme where nonimmigrant visa applicants paid him to approve their visas, netting him over $3 million. He initially kept his payments in a home safe, but as the stash grew, he purchased nine properties in Thailand to attempt to hide the proceeds of the scam. On his tax return for the year at issue, he reported his income from the Consulate Office, but did not report the bribery income. As part of his plea agreement, he agreed to sell the Thailand properties to help pay off the money judgement against him. The properties were sold at a loss, which the taxpayer deducted from his bribery proceeds. But the Tax Court determined that loss deductions are disallowed where the deduction would frustrate federal or state policy. Allowing a deduction for losses arising from the properties obtained through illegal activities would undermine public policy because a portion of the forfeiture would be borne by the Government. (Sestak v. Comm., TCM 2022-41)
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