Shreveport attorney explains IRS says stolen property, bribes must be reported as income

If you stole something in 2021, you only have a few days to return it or else claim it as income on your taxes.

"This tax provision is both remarkable and surprising," said Royal Alexander, a Shreveport attorney.

Literature provided by the IRS states that any income from illegal activities, such as money from dealing illegal drugs, must be included in your income taxes. This includes stolen property.

The property must be reported at its fair market value in your income in the year it was stolen unless it is returned to the rightful owner in that same year.

Alexander said, "The IRS appears to be suggesting, not primarily that crime should be avoided or prohibited, but that if a person steals property the IRS demands tax proceeds reflecting the value of the theft."

The U.S. Constitution states no person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a grand jury. This wording can be found in the fifth amendment, putting this rule in questionable territory.

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The IRS is asking individuals to report stolen or illegal activity to collect taxes.

"This creates the impression the IRS is looking past the crime itself to whether taxes may be collected from it," Alexander said.

In 1927 the U.S. Supreme Court saw this matter come in hand when a South Carolina bootlegger challenged his convictions on federal charges on the grounds of incriminating himself.

Justice Oliver Wendell Holmes Jr. rejected this argument.

To this day this court opinion still stands.

This is the same statute used to convict Al Capone in 1931 for tax evasion.

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Makenzie Boucher is a reporter with the Shreveport Times. Contact her at mboucher@gannett.com.

This article originally appeared on Shreveport Times: Shreveport Attorney: Return stolen items or claim them on your taxes