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The guideline is real.
The Internal Revenue Service’s Publication 17, available on the agency’s website, contains a section on stolen property that may leave readers scratching their heads. “If you steal property, you must report its fair market value in your income in the year you steal it unless you return it to its rightful owner in the same year,” the guideline states.
The issue of reporting illicit income to the government has raised questions before — even in the nation’s highest court.
In a 1927 case called United States v. Sullivan, the US Supreme Court considered whether prosecuting criminals for evading taxes on illegal income violated the Fifth Amendment, the provision of the Constitution that protects against self-incrimination.
In that case, a South Carolina bootlegger challenged his conviction on federal charges on the grounds that he could not be required to incriminate himself by declaring illegal income.
In a unanimous opinion, Justice Oliver Wendell Holmes Jr. rejected that argument. Nearly a century later, that court opinion still stands. Since then, many criminals have been convicted for tax evasion in a similar manner, including Al Capone in 1931.