dissenting.
By holding in this case that embezzled funds do not constitute a taxable gain to the embezzler under the Internal Revenue Code, I believe the Court misinterprets the Code. That interpretation is contrary to the established administrative construction of the Code and to what appears to be the intent of § 22 (a) as disclosed by its legislative history. Section 22 (a) expressly includes in the net income of a taxable person “gains or profits and *411income derived from any source whatever.” 26 TJ. S. C., § 22 (a). It is difficult to imagine a broader definition. This Court has said of this section, “The broad sweep of this language indicates the purpose of Congress to use the full measure of its taxing power within those definable categories.” Helvering v. Clifford, 309 U. S. 331, 334.
The legislative history of the section demonstrates the congressional intent to tax not merely “lawful” gains but all gains lawful or unlawful. Section IIB of the Income Tax Act of 1913,38 Stat. 167, provided originally that—
“. . . the net income of a taxable person shall include gains, profits, and income derived from salaries, wages, or compensation for personal service of whatever kind and in whatever form paid, or from professions, vocations, businesses, trade, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in real or personal property, also from interest, rent, dividends, securities, or the transaction of any lawful business carried on for gain or profit, or gains or profits and income derived from any source whatever, . . .” (Italics supplied.)
The Revenue Act of 1916 (39 Stat. 757), § 2 (a), reenacted this provision omitting only the word “lawful” before the word “business” so that now the final clause, as incorporated in § 22 (a), reads, “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 . . .” (Italics supplied.) The 1916 amendment demonstrated an intent to include gains, profits and income from any unlawful business as well as from any lawful business. It is inescapable evidence of a like intent to include Unlawful as well as lawful “gains . . . from any source whatever . . .” See United States v. Sullivan, 274 U. S. 259.
There have been many decisions to the effect that this section includes such unlawful gains as those from illicit *412traffic in liquor,1 race-track bookmaking,2 card playing,3 unlawful insurance policies,4 illegal prize fighting pictures,5 lotteries,6 graft,7 fraudulently misapplied moneys of a client by an attorney,8 “protection payments” to racketeers and ransom money paid to a kidnapper.9
The majority opinion in the present case recognizes that had “the taxpayer used the embezzled money and obtained profits therefrom such profits might have been taxable regardless of the illegality involved.” The majority opinion therefore does not exempt the embezzled funds from taxation merely because there is “illegality involved.” The opinion reaches its result by reading into § 22 (a) a legislative distinction I do not find there. The opinion limits the section to such gains, unlawful or not, as are accompanied with “a claim of right” by the taxpayer and as are not accompanied with “a definite, unconditional obligation to repay or return that which would otherwise constitute a gain.” Believing, as I do, that Congress in this section has sought “to use the full measure of its taxing power,” and in doing so has sought to tax all “gains . . . from any source whatever,” I am unable to recognize an adequate basis for reading into the broad sweep of the language the unexpressed limitation proposed in the majority opinion.
*413The embezzler’s complete possession of the embezzled funds, his exercise of dominion over them to the extent of disposing of every cent of them and his transfer of possession of them to others in such a manner as to give the recipients title to them, amounts to such an ample enjoyment of them, use of them, dominion over them, disposition of them and receipt of benefits from them as to make them of obvious economic value to the embezzler. Such a readily realizable value presents no reasonable basiá for exempting these funds from taxation that would be applied to them if earned in a lawfui manner. The “Government . . . may tax not only ownership, but any right or privilege that is a constituent of ownership. . . . Liability may rest upon the enjoyment by the taxpayer of privileges and benefits so substantial and important as to make it reasonable and just to deal with him as if he were the owner, and to tax him on that basis.” Burnet v. Wells, 289 U. S. 670, 678.
In National City Bank v. Helvering, 98 F. 2d 93, 96, L. Hand, J., writing for the court, said:
“Although taxes are public duties attached to the ownership of property, the state should be able to exact their performance without being compelled to take sides in private controversies. Possession is in general prima facie evidence of. ownership, and is perhaps indeed the source of the concept itself, though, the time is long past when it was synonymous with it. It would be intolerable that the tax must be assessed against both the putative tortfeasor and the claimant ; collection of the revenue cannot be delayed, nor should the Treasury be compelled to decide when a possessor’s claims are without legal warrant.”
In the present case, the embezzler concealed the embezzlement long enough to enable him to gamble away all of the embezzled funds. He asserted, falsely to be sure, but nonetheless positively, his right to dispose of the funds and he did dispose of them beyond all chance *414of their recovery. This was a use of them by him for his own enjoyment just as fully as though he had legal title to them. If he had .made gambling or other profits from them, he would have claimed those profits as his own and would have been taxed on those profits. If he had gained possession of the original funds by extortion, fraud or usurious practices, those gains would be taxable to him under the general language of § 22 (a). The majority opinion, however, holds that if he gained possession of the original funds by embezzlement then such gains ar'e not to be taxed to him under that language. This reads into the section a sharp distinction between the embezzler and defrauder, exempting the former but not the latter. In the absence of an express declaration of such an intent by Congress, I believe that the courts are not justified in reading such a distinction into this section.
Furthermore, where an embezzler uses embezzled funds for his-own purposes and, by concealment of the embezzlement or otherwise, deprives his victim of a corresponding opportunity to enjoy those funds, the Code permits his victim to deduct as a “loss,” from the victim’s taxable income, the sums so embezzled.10 See Burnet v. Huff, 288 U. S. 156. The allowance of such a deduction suggests the intent of Congress to transfer the liability for the tax on those funds to the embezzler. The majority opinion prevents such a transfer.
A point has been made of the fact that the Government’s tax lien upon property of the embezzler would have priority over the claim of the victim of the embezzlement to recover from such property the losses which the victim suffered by the embezzlement. This priority of the tax lien is hardly an adequate argument to eliminate the tax itself. At most it is an argument for Congress to modify the tax lien in favor of the victim.
*415There is nothing in the Code that expressly requires, as a condition of the existence óf a taxable gain, that there also be an absence of “a definite, unconditional obligation to repay or return that which would otherwise constitute a gain.” In the case of National City Bank v. Helvering, supra, p. 95, the taxpayer was taxed on bonds which he had unlawfully withheld from the corporation of which he was an officer. These bonds were the property of the corporation in the sense that it could have reclaimed them and the court said—
“But there are several cases in which persons have been taxed upon property which could be recovered from them. For example, the lender upon usurious interest — if on an accrual basis — must include his apparent profit in his return, though possibly he may be allowed to deduct it as a loss if the borrower reclaims it. Barker v. Magruder, 68 App. D. C. 211, 95 F. 2d 122. Again, when a railroad collects too large fares, the excess is income, though the passengers have a theoretical right of restitution. Chicago, R. I. & P. R. Co. v. Commissioner, 7 Cir., 47 F. 2d 990.”
The administrative interpretation of § 22 (a) long has been to tax the embezzled funds. Tt dates at least from G. C. M. 16572, XV-1 Cum. Bull. (1936) 82, in which it was expressly recommended that, the profits of an embezzler “constitute taxable income in the hands of the embezzler for Federal income tax purposes.” This interpretation was followed by the Tax Court in this case and it has been regularly followed by the Board of Tax Appeals in the past. Kurrle v. Commissioner, 1941 Prentice-Hall B. T. A. Mem. Decisions, ¶ 41,085, affirmed, 126 F. 2d 723; Estate of Spruance v. Commissioner, 43 B. T. A. 221, reversed sub nom. McKnight v. Commissioner, 127 F. 2d 572.
Because of the legislative history of § 22 (a), the breadth of the language used by Congress in that section, the attempt of Congress to use the full measure of its taxing *416power in that section, the long established administrative practice of holding embezzled funds to be taxable income of the embezzler, and finally because of the arbitrary distinctions in favor of the embezzler which arise from an opposite interpretation of the Code, I believe that embezzled funds are taxable gains as defined by Congress.
United States v. Sullivan, 274 U. S. 259. See also, Steinberg v. United States, 14 F. 2d 564; Maddas v. Commissioner, 40 B. T. A. 572, affirmed, 114 F. 2d 548; Poznak v. Commissioner, 14 B. T. A. 727.
M’Kenna v. Commissioner, 1 B. T. A. 326.
Weiner v. Commissioner, 10 B. T. A. 905.
Patterson v. Anderson, 20 F. Supp. 799.
Rickard v. Commissioner, 15 B. T. A. 316.
Droge v. Commissioner, 35 B. T. A. 829; Huntington v. Commissioner, 35 B. T. A. 835; Voyer v. Commissioner, 4 B. T. A. 1192.
Chadick v. United States, 77 F. 2d 961, cert, denied, 296 U. S. 609.
United States v. Wampler, 5 F. Supp. 796.
Humphreys v. Commissioner, 42 B. T. A. 857, affirmed, 125 F. 2d 340.
26 U. S. C. §23 (e).