Podiatrist Plays Footsie


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Income

Podiatrist Plays Footsie With Drug Dealers

By: A.J. Cook

Podiatrist Jess Kraft played footsie with illegal drug dealers, and it cost him.

When the authorities found out about Kraft's scheme, they arrested him. His indictment by a grand jury said he performed unnecessary foot and toe surgeries on drug dealers and users, promising them Demerol and other prescription drugs. It stated further that after the needless operations, the doctor billed Blue Cross/Blue Shield of Michigan.

The insurer claims he defrauded it of $680,000; Kraft disagreed claiming he "improperly" billed Blue Cross for only $19.

Kraft pled guilty to mail fraud and distributing drugs and agreed to pay Blue Cross $160,000. He received a seven year sentence and $26,000 fine.

The foot doctor got hobbled when he took a tax deduction for the $160,000. The IRS explained this was a penalty, and penalties aren't deductible.

The Moral: Don't take illegal deductions if you can't foot the bill.

* * * * * * * * * * * * * * * * * * * * * * * * * * *

William L. Patch went on a crime spree in Florida robbing five banks.

Then searching for a safe haven, he landed in the Dominican Republic. There he became careless. While spending his $32,000 loot, he cashed in some of the stolen travelers checks and was immediately arrested.

Under a plea agreement he paid back the money, and a Florida U.S. District Court sentenced him to 15 years in jail.

Patch thought his problems were over. But they weren't. When he failed to pay taxes on his robbery income, the IRS paid him a visit. He argued that taxing him on money he returned, and was now in prison for stealing, was double jeopardy.

The Tax Court judge disagreed. He said the criminal action of robbery and the civil action of under reporting income were separate offenses.

Patch had to pay - in more ways than one.

The Moral: Wages from the sin of stealing are lean and taxable.

A.J. Cook is a lawyer and CPA. His tax column appears weekly in numerous newspapers. Why isn't it published in your hometown newspaper? Ask its Business Editor to subscribe.

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