Isn't that the kind of thing that got Al Capone into trouble?

I normally leave the tax blogging to Joe, but I can't resist linking to Peebles v. Commissioner, for the sheer entertainment value. Apparently, the Peebles are an Arkansas couple. Mrs. Peebles was having an affair, and Mr. Peebles found out about it. Together, they apparently decided that even if the Courts now take a pretty dim view of alienation of affection lawsuits, they would try to enforce the concept on their own by shaking down the paramour, Dr. John M. Hestir. Dr. Hestir proved a fairly willing target, handing the Peebles not only $25,000, but some free legal advice:

Dr. Hestir said he was sorry about the affair and stated that this was “free money”, but that petitioner should be careful how he spent it because it could be considered income.

The Peebles should've listened to the doctor, because he filled out a Form 1099-MISC, Miscellaneous Income, reporting that he had paid $25,000 to them. The Peebles somehow forgot to report that on their own income taxes, leading to an audit and this fun little case about whether the money was a "gift" or "income."

h/t TaxProf Blog.

Related links: Monty Python's Flying Circus Episode #15.