In another case an insider trader does not get a tax write-off for the forfeiture of his profits.
A former executive was convicted of insider trading and sentenced to jail. He was also forced to return the stock sale gains that were derived from his crime, the profits that he had reported were taxable income on his prior-year tax return.
After he claimed a loss deduction when he paid back his ill-gotten gains, the IRS balked.
In 2014, a federal trial court rejected the Service’s argument that the forfeited gains rose to the level of a nondeductible fine or penalty. But an appeals court in D.C. has now reversed that decision and disallowed his loss. So now he pays.
Nacchio, Fed. Cir.