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.