Hobert E. Murphree and Maureen Murphree v. United States

EDITH H. JONES, Circuit Judge:

At issue is whether the Murphrees are entitled to a loss deduction from their income taxes upon the return of misappropriated funds to their closely held company. The district court ruled that the loss deduc tion was not available because the Mur-phrees were under no legal obligation to return the misappropriated funds. Concluding that the Murphrees had an obligation to return the funds to the corporation under state law, and that their repayment was therefore involuntary, we reverse the judgment of the district court.

BACKGROUND

Hobert Murphree was the president…