Henry invest $50000 in an entity called Forward investment in January 202012. During 2012 in December 31 2012 he earned $9600. In January 2013 he hears a
rumur that Forward Investment is not legitmate investment broker. On January 262013 Henry withdraws his investment receiving $60050 (the $50000 orginal
investment plus $10050 in earning) In late Fabruary He learns that Forward Investment is a pyramid scheme through which early in vstors were paid earnings out
of capital contribution by later investors. The US Securities and Exchange Commision files suite against Forward in March 2013
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Henry wants to know the taxability of the amounts he received from Forward. He thinks that he never really earned any income from his investment because he was
paid out of later investors capital contribution.
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what is the tax effect of the payments he received?
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what are the Interna Revenue code sections revenue rulings tax courts cases juditial cases to the capital contirbution investment to explain to him the
capital earning taxiability?
