CASE
Zarin v. Commissioner
United States Court of Appeals. 1990
916 F.2d 110.
FACTS
The plaintiff, David Zarin is a professional engineer, and in June, 1978, applied for a $10,000
line of credit with Resorts International Hotel and was approved. in November, 1979, his line of
credit was increased to $200,000, and would continue to be increased incrementally. As of
December, 1979, Zarin had accumulated losses of $2,500,000, which he paid, but in April,
1980, Resorts returned bounced checks totaling $3,435,000, which was settled in September,
1981, for $500,000. The commissioner The IRS claimed that Zarin had $2,935,000 of
unreported income, which was the difference of his $3,435,000 debt, and the $500,000
settlement between Zarin and Resorts, and argued that it was income from indebtedness.
ISSUE
Did the defendant, Zarin, have gross income, regarding his indebtedness to Resorts
International Hotel?
DECISION
No, the court held Zarin had not incurred $2,935,000 includable in his gross income stemming
from the forgiveness of his debt in accordance with the settlement.
REASON
The court found that Zarin had acquired gaming chips, which the casino agreed was equal to
an amount of $500,000
Side Note:
When I worked at Mohegan as a gaming commissioner it was very hard for the courts outside
of the tribal courts to prosecute employees for theft of chips, even with value as anything other
than theft of gaming equipment, with just the FMV of the equipment as the basis for the
larceny, rather than the value of the chips. Same principle as this case.