Question

Yuri embezzled $5,000 from his employer but was not caught by his employer. Which of the following statements is true?

A) Yuri must include the $5,000 in his gross income.
B) Yuri does not need to include the $5,000 in his gross income.
C) Yuri only needs to include the $5,000 if he is caught by his employer.
D) Yuri can exclude the $5,000 from his gross income since he was not caught.

Answer 1

Yuri must include the embezzled $5,000 in his gross income, as illegal income is considered taxable according to the IRS.

Step-by-step explanation:

The student asked whether Yuri must include the embezzled $5,000 in his gross income. The correct answer is A) Yuri must include the $5,000 in his gross income. According to the Internal Revenue Service (IRS), illegal income, such as money from dealing drugs or stolen property, should be included in your income on Form 1040, line 21, or Schedule 1 (Form 1040) if from a business source. Even if Yuri is not caught by his employer, for tax purposes, embezzlement or any other form of theft is considered income and is taxable.