Wednesday, September 12, 2007

Tax Attorney: Fraud and False Statements: Evidence

Defendant's records, voluntarily produced to revenue agents in investigation of his income tax liability, were not suppressible as evidence in proving assistance in the preparation of fraudulent returns for others. There was no evidence that the records were obtained by misrepresentation.

J.P. Dupont, DC, 59-1 USTC ¶9204, 169 FSupp 572.

Motion to suppress evidence of wilfully preparing false returns was denied.

L.H. Kupper, DC, 60-1 USTC ¶9235, 179 FSupp 264.

E.G. Austin, DC, 63-1 USTC ¶9157, 209 FSupp 101.

A motion by defendant to suppress as evidence papers seized by IRS inspectors was granted where the warrant for his arrest on a complaint charging him with making false statements was unlawful, the arrest itself was unlawful, and the search and seizure were unreasonable.

L.M. Bayley, DC, 65-2 USTC ¶9610.

All materials seized by the IRS under a defective search warrant were suppressed and the defendants' convictions (one convicted of willfully subscribing to a false corporate return, the other convicted of aiding in preparation of a false return, and both convicted of conspiracy) were reversed. The warrant used to seize corporate records authorized an unlawful general search of the business premises and thus the warrant was impermissibly general in scope. Total suppression was required since no portion of the warrant was particularized.

J.B. Cardwell, CA-9, 82-2 USTC ¶9470, 680 F2d 75.

A bingo hall operator's conviction for filing a false tax return was reversed because it was based on evidence obtained in violation of his Fourth Amendment rights against unreasonable search and seizure. The evidence was seized pursuant to a search warrant for records pertaining to the taxpayer's illegal gambling activities, but was unrelated to his bingo operation; instead, it revealed his failure to report income during a year that preceded his involvement in any gambling operation. The government's argument that the warrant covered the records at issue because they established the taxpayer's overall financial condition, showed that a charitable organization functioned as his alter ego, and demonstrated that his bingo operation was permeated by fraud was rejected as overbroad. The government also failed to prove that the inevitable discovery doctrine exempted the records from the exclusionary rule since it failed to show that it would have uncovered the records during its civil investigation of the taxpayer.

D. Ford, CA-6, 99-2 USTC ¶50,724, 184 F3d 566.

The IRS was entitled to retain copies of financial documents that it had seized from a chiropractic office pursuant to a valid search warrant, but it could not retain similar documents that had been seized from the taxpayer's residence because the seizure was not authorized by a warrant. A co-tenant's permission was inadequate because the taxpayer retained full authority over the records and did not relinquish any authority or control to him.

J.L. Marvin, CA-8, 85-2 USTC ¶9858.

The testimony of the taxpayer's wife was sufficient to establish probable cause to seize records relating to his car rental business that were used as evidence to convict him of tax evasion and fraud. The wife's statements to IRS agents did not constitute testimony to which the privilege against adverse spousal testimony applied nor did the privilege for confidential marital communication apply because the wife did not inform the IRS of any communicative utterance by the taxpayer.

A.M. Lefkowitz, CA-9, 80-2 USTC ¶9722.

The taxpayer's motion to suppress evidence obtained from him by an IRS agent who failed to state the criminal nature of the investigation was dismissed since the taxpayer was properly given his Miranda warnings and the information was voluntarily given without any fraud or deceit by the agent.

D.C. Potter, DC, 75-1 USTC ¶9328, 385 FSupp 681.

In a prosecution for falsely claiming automobile expense deductions on a taxpayer's returns for 1956-1958, it was error to admit returns for earlier years as evidence of wilfulness where it was not claimed that the prior returns violated the law. The court also erred in precluding the defendant from introducing his copies of the W-2 forms filed with his returns and in not permitting him to prove that statements made by a witness for the prosecution and allegedly in the possession of the government were in existence.

A.J. Accardo, CA-7, 62-1 USTC ¶9170, 298 F2d 133.

Evidence of federal income tax fraud was admissible even though derived from inadmissible evidence of a nontax offense. That evidence had been seized during the course of an illegal search by county officials five months before the alleged fraud was perpetrated. The derivative evidence was cleansed of taint by the lapse of time. Moreover, exclusion of the evidence of tax fraud would not have achieved "substantial deterrence" of unlawful conduct by law enforcement officers since, under the facts, the local authorities could not have foreseen this prosecution at the time of the defendant's arrest.

T.A. Paepke, CA-7, 77-1 USTC ¶9302, 550 F2d 385. After remand, unreported District Court decision was aff'd in unreported CA-7 opinion, 7/12/79.

On the trial of an individual charged with wilfully and knowingly assisting salesmen in preparing false income tax returns by advising them that they did not have to report commissions, the trial court erred in refusing to require the salesmen to deliver to the defendant reports of Internal Revenue Service agents making adjustments to their income.

J.F. Hull, CA-5, 63-2 USTC ¶9821, 324 F2d 817.

Evidence that a certified public accountant who prepared salesmen's returns deducted expenses, which should have been capitalized, was not sufficient to prove willful violation of the law. However, evidence that he advised the salesmen not to report commissions was a violation.

J.F. Hull, CA-5, 66-1 USTC ¶9259, 356 F2d 919.

It was not error to refuse to admit evidence of income tax overpayment. Although this evidence might have aided the defendant's defense that he relied on his accountant in good faith, it could have had no impact on the case as a whole because the evidence suggested that he withheld relevant data from the accountant.

L.E. Johnson, CA-5, 77-2 USTC ¶9622, 558 F2d 744.

Even assuming that certain documentary evidence was exculpatory, its production during (instead of before) the trial did not result in an unfair trial. The jury considered the evidence in arriving at its verdict and there would have been no point in ordering a new trial during which a different jury would have to consider the same evidence.

J. Kaplan, CA-3, 77-1 USTC ¶9441, 554 F2d 577.

Certain invoices and cancelled checks admitted to prove that the defendant had failed to report gross income from his business, which were allegedly obtained through the use of information taken from illegally seized records, should not have been suppressed as "fruit" of the illegal seizure.

A.B. Carsello, CA-7, 78-2 USTC ¶9580, 578 F2d 199. Cert. denied, 11/27/78.

The evidence was sufficient to support the jury's conclusion that the defendant was a party in a scheme to conceal corporate income, which fact was the basis of the criminal actions. The fact that the defendant did not sign or file the corporate returns was not material.

A. Maius, CA-6, 67-2 USTC ¶9521, 378 F2d 716. Cert. denied, 389 US 905.

A 1961 income tax return was admissible as evidence in a trial involving the willful making of fraudulent returns in 1963-1965 as it was intended to show a pattern of overstatement of deductions. It was also proper to admit as evidence a 1965 income item that was reported in the taxpayer's 1964 return, admission being only to show knowledge and willfulness.

C. Bishop, CA-9, 73-2 USTC ¶9674, 485 F2d 248.

The taxpayer's conviction on two counts involving false statements in an offer to compromise his civil tax liability was reversed. The trial court had erroneously received in evidence an exhibit offered by the government wherein the taxpayer admitted a prior felony conviction for tax fraud, which had no connection with the charge that he had made false statements and could only be prejudicial since he had not elected to take the stand.

A.S. Birns, CA-6, 68-1 USTC ¶9365, 395 F2d 943.

The trial court did not err by admitting evidence of other related income tax crimes, since the evidence helped to establish the taxpayer's intent and also the other elements of the crime of willfully aiding and advising in the preparation of false and fraudulent tax returns.

L.V. Amos, CA-8, 74-1 USTC ¶9447, 496 F2d 1269.

A taxpayer's conviction for claiming false estimated tax payments on his return, with the aid of IRS employees, was affirmed. The manner in which the IRS gathered evidence (from the IRS employees and taxpayer's accountant) was not a ground for reversal.

D. Lopez, CA-2, 70-1 USTC ¶9115, 420 F2d 313. Decision remanded on another issue, CA-2, 70-2 USTC ¶9488, 428 F2d 1135.

Taxpayer's conviction for willfully and knowingly aiding and assisting in the fraudulent preparation of tax returns was upheld. Evidence of an IRS agent's return preparation procedures was properly excluded. Also, taxpayer's noncriminal activity was properly excluded as being irrelevant.

W.P. Dobbs, CA-5, 75-1 USTC ¶9210, 506 F2d 445.

The government should have produced, at trial, its audits of the defendant in response to a defense request. The case was remanded for the trial judge to inspect the contents of the audit.

G.F. Brown, CA-5, 78-2 USTC ¶9550, 574 F2d 1274. Cert. denied, 439 US 1118.

The evidence was not sufficient to show that a defendant was involved in a conspiracy to conceal the name of the winner of a twin double at a racetrack and to prepare a false Form 1099. However, the fact that the government did not offer proof of the conspiracy's existence at regular intervals during the period charged did not preclude another defendant's conviction.

T. Cantone, CA-2, 70-1 USTC ¶9394, 426 F2d 902.

Taxpayer's conviction for conspiring to conceal the fact that he was the actual winner of horse races for purposes of reporting his winnings on Form 1099 was upheld.

P.J. Dumaine, CA-1, 74-1 USTC ¶9317, 493 F2d 1257.

In cases that involved the same racetrack, the evidence was sufficient to prove a conspiracy.

S. Haimowitz, CA-2, 69-1 USTC ¶9107, 404 F2d 38.

S. Green, CA-2, 70-1 USTC ¶9199, 421 F2d 1237.


J.A. Rizzo, DC, 70-2 USTC ¶9660, 313 FSupp 734.

A. Kessler, CA-2, 71-2 USTC ¶9693, 449 F2d 1315.

L. Maistrow, CA-2, 71-2 USTC ¶9762, 451 F2d 1342.

L. Salerno, DC, 72-1 USTC ¶9169, 330 FSupp 1401.

A.J. Cobb, CA-2, 71-2 USTC ¶9593, 446 F2d 1174.

D. Handel, CA-2, 72-2 USTC ¶9521, 464 F2d 679. Cert. denied, 409 US 984.

R.J. Lincoln, CA-5, 73-1 USTC ¶9209, 472 F2d 1183.

F. La Haye, CA-3, 77-1 USTC ¶9152, 548 F2d 474.

A conviction could not stand under circumstances where a taxpayer allegedly was observed by Government agents while cashing a racetrack ticket for the true owner and signing Form 1099 in exchange for a commission. The conviction was reversed because the Government failed to prove a tax deficiency against the true owner for the year involved. Thus, his testimony was rendered incompetent and caused a material deficiency in the proof.

L. Petti, CA-3, 71-2 USTC ¶9653, 448 F2d 1257.

A man who filled out race track forms for the true winners was properly convicted of filing false returns. Evidence of other acts to demonstrate intent was properly admitted. Nor did the government have to show a loss of tax revenue from the scheme.

M.H. Cohen, CA-4, 80-1 USTC ¶9288, 617 F2d 56.

The appellate court, in affirming taxpayer's conviction for making and subscribing to false income tax returns, held that the District Court did not err by not requiring the government to introduce evidence of all items which the jury might find to be an allowable reduction of his income.

R.H. Lawhon, CA-5, 74-2 USTC ¶9634, 499 F2d 352.

During a criminal prosecution of a return preparer, it was not reversible error to introduce into evidence a chart summarizing the testimony of the preparer's clients. Although the chart contained inadmissible portions, the fact that the jury did not unduly rely upon it was shown by that body's acquittal of the preparer on five of the thirteen items with which the chart dealt.

W.R. Conlin, CA-2, 77-1 USTC ¶9291, 551 F2d 534. Cert. denied, 434 US 831.

Falsified information on taxpayer's return indicating that sums had been deposited with the Federal Reserve bank was material, even though the IRS relies primarily on information supplied it by the bank.

H.M. Romanow, CA-1, 75-1 USTC ¶9153, 509 F2d 26.

The lower court did not err in admitting testimony of the taxpayer's failure to file tax returns for the six years preceding 1968, since such evidence was relevant to the issue of willfulness, which must be proved whether the offense charged is failure to file or false filing.

K.L. Snow, CA-9, 76-1 USTC ¶9227, 529 F2d 224. Cert. denied, 429 US 821.

The taxpayer's conviction for filing false federal tax returns was reversed because the trial judge erred in excluding the taxpayer's testimony concerning allegedly inconsistent statements made by a government witness.

W.E. McLaughlin, CA-9, 82-1 USTC ¶9105, 663 F2d 949.

The Government's failure to disclose certain exculpatory evidence that the accountant's employee was responsible for the preparation of the false returns of two of the prosecution's witnesses until near the close of the presentation of the defense did not warrant an automatic reversal. The suppression of such evidence was not complete, but merely late, and was not prejudicial because the judge offered the defendant a continuance. Moreover, the evidence would not have been helpful because the jury was already aware of this fact from the testimony of these two witnesses at trial.

O.H. Miller, CA-9, 76-1 USTC ¶9228, 529 F2d 1125. Cert. denied, 426 US 924.

The evidence was sufficient to sustain the conviction under the net worth method of calculating income as applied by the Commissioner; the evidence was sufficient to show willfulness on the part of the taxpayer to evade taxes; and the trial court did not commit prejudicial error when it permitted an IRS agent to testify that the taxpayer had been previously investigated for possible tax fraud in connection with his returns for 1958 and 1959 since it was made clear that no criminal liability ever attached.

M. Stone, CA-8, 76-1 USTC ¶9310, 531 F2d 939. Cert. denied, 429 US 824.

The U.S. Supreme Court remanded a case involving the government's failure to produce certain material in its possession when requested to do so by the defendant's attorney. The case was remanded for reconsideration in light of a decision in a nontax case (Agurs, 427 US 97).

J.M. McCrane, Jr., SCt, 76-2 USTC ¶9517, 427 US 909, vacating and rem'g CA-3, 76-1 USTC ¶9147, 527 F2d 906.

On remand, the Third Circuit again held that the government should have produced the evidence in its possession. The defendant's request for material that could be used to impeach prosecution witnesses, including, but not limited to, any standards used by the government in declining prosecution of similar cases, was sufficiently specific under Agurs.

J.M. McCrane, Jr., CA-3, 77-1 USTC ¶9376, 547 F2d 204.

Motion for a new trial on the grounds of newly discovered evidence was denied. The evidence, had it been disclosed to the defendant promptly, would not have affected the outcome of the case.

J.M. McCrane, Jr., CA-3, 78-2 USTC ¶9600.

The appellate court held that handwriting exemplars, taken from two prosecution witnesses during taxpayer's trial for willfully and knowingly filing a false tax return at the request of the prosecution and outside the presence of the court, the jury, and defense counsel, for examination by the Government's expert, were properly admitted into evidence since neither witness was on trial, and defense counsel had an opportunity to cross-examine each individual concerning the circumstances in which he made the exemplars.

V.M. Pastore, CA-2, 76-2 USTC ¶9513, 537 F2d 675.

It was not error to admit into evidence documents that the defendant had turned over to the government in compliance with a subpoena issued pursuant to a grand jury investigation of other persons. He had waived his privilege against self-incrimination by complying with the subpoena. Nor did admission of the documents violate the secrecy of grand jury proceedings.

J.E. Penrod, CA-4, 79-2 USTC ¶9728, 609 F2d 1092. Cert. denied, 446 US 917, 100 SCt 1850.

Out-of-court declarations made by one defendant in a false statements case were properly introduced against the other defendant. The statements were not hearsay because they were offered to prove their falsity rather than their truth.

R.L. Fox, CA-5, 80-1 USTC ¶9337, 613 F2d 99.

Tape-recorded statements of a partner which were not given "under an oath subject to the penalty of perjury" were hearsay. The prejudice resulting from the use of the hearsay at trial to support the government's conviction of the partnership's accountant was not harmless when balanced against "the marginal evidence developed by the government." The use of the hearsay evidence supporting a partner's conviction on two counts also was not harmless error for the same reason; however, the prejudice resulting from his conviction on a third count was harmless when balanced against overwhelming evidence that he had received unreported partnership payments.

D.E. Day, CA-6, 86-1 USTC ¶9394.

A former IRS agent and his brother were properly convicted of a number of offenses, including filing false returns. Exemplars of the former agent's handwriting were properly authenticated. Statements of one conspirator that implicated the other were properly admitted. Admission of the former agent's returns to show acquisition of wealth was not enough, in and of itself, to mandate reversal.

F. Mangan, CA-2, 78-1 USTC ¶9349, 575 F2d 32.

A false return conviction was affirmed. Willfulness was established by the defendant's use of false names and his surreptitious use of cash. It was not improper to admit testimony of a prosecution witness who had testified differently in the past or to deny a motion for severance. Notebooks seized at the defendant's gas station were properly admitted.

F.W. Holladay, CA-5, 78-1 USTC ¶9218, 566 F2d 1018.

A false return conviction was affirmed. Failure to report substantial amounts of gross livestock receipts on Schedule F, Form 1040, rendered the return materially false. Truthful reporting is required on the schedule even though it was not expressly promulgated by any regulation. Nor did government implications of underpayment of taxes alter the rule that tax liability is immaterial to false returns prosecutions.

M.A. Taylor, CA-5, 78-1 USTC ¶9474, 574 F2d 232. Cert. denied, 99 SCt 251.

A corporate vice president, who reported as "ordinary business losses" on Schedule C his losses in connection with numerous stock option and commodity futures transactions, was properly convicted on two counts of willfully making and subscribing false federal income tax returns. The evidence established the false characterization of his trading activity and business name on Schedule C, which suggested that the vice president knew that accurate descriptions would trigger inspection and ultimate disallowance of the ordinary loss deductions by the IRS. The evidence also established that the vice president's education and professional experience suggested an extraordinary sophistication with respect to tax matters, and he reported trading losses in prior and subsequent years as "capital losses" and caused his father to so report his losses from similar activity.

P.H. Diamond, CA-4, 86-1 USTC ¶9356, 788 F2d 1025.

A labor union official was properly convicted of filing a false return. The evidence given by an accomplice was not inherently implausible. Alleged government misconduct could not vitiate the conviction; it was acceptable to pay informant fees to the accomplice, it was irrelevant that the government submitted evidence to the jury related to items of unreported income in excess of the limitation imposed by the court and the defendant was not harmed by the late disclosure of exculpatory material. The lower court did not err in denying his request for a special verdict. The jury instructions adequately defined a gift and were sufficient even though they did not state that the offense could not have been willful if the defendant believed that the items in question were gifts to him.

D.E. Shelton, CA-9, 79-1 USTC ¶9189, 588 F2d 1248.

A conviction for aiding in the preparation of false returns was remanded so that the trial judge could decide whether a report made by a special agent, which the trial judge had refused to order produced, would show that a substantial number of the returns prepared by the defendant contained no error. This report might have had a bearing on the critical issues of motivation and intent.

D. Sternstein, CA-2, 79-1 USTC ¶9338, 596 F2d 528.

After the remand, the appellate court affirmed the trial judge's finding that the probative value of the report was negligible at best.

D. Sternstein, CA-2, 79-2 USTC ¶9626, 605 F2d 672.

The convictions of a manager of a cooperative and its accountant for conspiracy and for wilfully subscribing false and fraudulent corporate income tax returns were affirmed. Personal income tax returns of the officer were relevant to the conspiracy count and were properly admitted in evidence. Rulings at trial curtailing cross-examination of an IRS agent, refusal to give jury instructions offered by the defendants governing taxation of loans from a corporation to an officer and comments by the trial court on the evidence did not preclude the defendants from presenting their theory of defense to the jury. The trial court did not err in not inspecting a file containing a memorandum prepared by IRS counsel in camera since defense counsel accepted the prosecution's assurance that the file did not contain material subject to discovery.

J.E. White, CA-8, 82-1 USTC ¶9220, 671 F2d 1126.

No basis existed for excluding evidence relating to the proposed and final amendments of Reg. §1.612-3(b)(3) from the trial of a group of individuals on tax fraud charges because prosecution for violation of the regulation was not necessary to establish criminal fraud under the indictment. Evidence concerning the regulation, the defendants' understanding of it, and their alleged actions to circumvent its effects may be relevant in the trial.

R. Osserman, DC, 82-1 USTC ¶9315.

The trial court did not commit reversible error in excluding evidence relating to bias during the cross-examination of a government witness. Although the taxpayer was precluded from asking about a specific incident, he was permitted to cross-examine the witness extensively regarding his possible motives in testifying favorably for the government. Moreover, the jury was in possession of sufficient information to assess the witness's possible bias. In addition, the trial court did not err in refusing to admit into evidence, for impeachment purposes, copies of a civil action brought against the witness. The documents did not contradict the witness's testimony. Furthermore, the trial court did not err in admitting and relying on the government's sentencing memorandum and affidavit.

F.P. Tracey, CA-1, 82-1 USTC ¶9325. Cert. denied, 105 SCt 787.

The taxpayer's conviction for willfully filing false corporate income tax returns was affirmed. The evidence was sufficient to establish that he willfully omitted substantial amounts of income from the returns. A denial of a proposed jury instruction was not error. The taxpayer's conviction for obstruction of justice, based on evidence of intimidation and threats of force against former employees to prevent their communication with IRS investigators, was affirmed.

R.C. Thetford, CA-5, 82-1 USTC ¶9393, 676 F2d 170.

The fact that the taxpayer's name was signed to the tax returns was prima facie evidence in prosecution for income tax violations that he actually signed them.

V. Carrodeguas, CA-11, 85-2 USTC ¶9567.

A taxpayer's conviction for understating his income and the income of his deceased aunt's estate for the purposes of preparing her income tax return was upheld. Documents belonging to the law firm engaged by the taxpayer to prepare the return and testimony of its employees was properly admitted. The information given to the attorneys by the taxpayer was transferred to the firm for the purpose of preparing a tax return and was not protected by the attorney/client privilege.

D.H. Windfelder, CA-7, 86-1 USTC ¶9402.

A tax shelter promoter's conviction on charges of willfully filing and assisting others in filing false returns was upheld where the appellate court rejected allegations of error regarding jury instructions and the admission into evidence of certain statements.

W.J. Kelley, CA-7, 89-1 USTC ¶9132, 864 F2d 569.

Suppression of evidence on collateral estoppel grounds was unwarranted. The lower court barred evidence that the taxpayer owned certain stock accounts or committed tax law violations because he had been acquitted of tax evasion. The appellate court held that the taxpayer did not prove that the jury in the first trial decided the issues in his favor.

I.P. Citron, CA-2, 88-2 USTC ¶9552.

A mayor who failed to report the receipt of income from a constituent was properly convicted of filing false tax returns. The evidence indicated that the mayor knew that the constituent was not making a loan or a campaign contribution. Given the large amount of unreported income in comparison to his reported income, the jury could infer that the mayor intended to violate the tax laws and had not made an honest mistake.

W.R. Tucker, III, CA-9, 98-1 USTC ¶50,147, 133 F3d 1208.

Evidence of a public official's zoning and political activities on behalf of a developer that paid the official for consulting services was properly admitted.

J. Howard, CA-11, 88-2 USTC ¶9522.

A statement by a husband in a previous affidavit that was inconsistent with his testimony supporting false claims at a trial for willfully aiding and assisting in the preparation of false and fraudulent income tax returns was admissible under the hearsay rule only to establish the credibility of the witness and could not be used as substantive evidence. An accountant's testimony of a conversation he had with the defendant in which the defendant offered to backdate documents for another taxpayer was admissible under the recent admission of a party exception to the hearsay rule. Additionally, the offer to commit a similar crime was itself a similar act and was relevant as to the issue of willfulness.

N. Micke, CA-7, 88-2 USTC ¶9553.

Perjury convictions were overturned against married taxpayers who were charged with making false federal income tax returns. The government had failed to prove the materiality of allegedly false testimony given by the wife in the course of a deposition in connection with her sex discrimination suit against a federal agency.

A.B. Adams, CA-6, 89-2 USTC ¶9438, 870 F2d 1140.

Conviction for preparing false tax returns was upheld. Materiality of false information on returns was a matter of law left to the court. Proceeding in the taxpayer's brief absence with part of the trial was proper since the government's case was strong and trial transcripts were made available to the taxpayer. Evidence of convictions for passing bad checks was properly admitted since dishonesty and false statements were elements of the convictions. Finally, the government's harsh closing argument did not constitute plain error due to its strong case.

S.E. Rogers, CA-4, 88-2 USTC ¶9538.

A trial judge properly refused to admit the expert testimony of a CPA in a criminal tax fraud case because the charge was not that the returns were filled out improperly, but that the returns contained misstatements of fact of which the accountant had no knowledge. Further, there was sufficient evidence to support the conviction since it was up to the jury to decide whether to accept the testimony as to the taxpayer's limited ability to read and his capacity to understand the returns.

E.K. Dorotich, CA-9, 90-1 USTC ¶50,202, 900 F2d 192.

A taxpayer's conviction for filing false individual and corporate returns was upheld. The jury had ample evidence to sustain the three counts, which involved gambling debts that were paid as "commissions" from the taxpayer's wholly owned corporation and the unreported constructive dividends that the taxpayer received from his corporation. Statements that the taxpayer made to an IRS agent, which were obtained by the agent in violation of IRS manual guidelines, were not obtained through "fraud, trickery and deceit." Finally, evidence of the taxpayer's alleged dealings with bookmakers was relevant because it showed a continuing course of conduct, was not directed at the taxpayer's character, and was not prejudicial.

E.R. Knight, CA-5, 90-1 USTC ¶50,246, 898 F2d 436.

The due process clause did not require the suppression of currency seized at the Canadian border, even though the taxpayers alleged that they did not know they were required to report the currency upon leaving the United States. Thus, other evidence obtained as a result of the seizure was not suppressed.

B. Romano, DC N.Y., 89-2 USTC ¶9653. Rev'd and rem'd on other issues, CA-2, 91-2 USTC ¶50,471.

See, also, related cases at ¶41,333.210.

Evidence of transfers between corporations wholly owned by the taxpayer demonstrated that the taxpayer engaged in transactions for the purpose of evading income tax and were admissible to show intent to commit the crime of filing a false income tax return.

L.R. Mews, CA-7, 91-1 USTC ¶50,044, 923 F2d 67.

A taxpayer was properly convicted of aiding and assisting in the preparation or presentation of false documents where he willfully caused false statements to be included in Form 1099-B, Proceeds from Broker and Barter Exchange Transactions. A motion for judgment of acquittal on the grounds of insufficient evidence was properly denied. Certain bank transactions, currency reports and tax returns were properly allowed into evidence. Evidence of an acquittal on a criminal charge involving state securities' laws was properly excluded. Finally, the issue of materiality of alleged false statements was properly submitted to the jury because it was submitted at the request of the taxpayer.

R.S. Cutler, CA-10, 92-1 USTC ¶50,062, 948 F2d 691.

An individual's conviction for aiding in the preparation of false income tax returns was affirmed. The district court properly denied his motions for a new trial and reconsideration because his claims that the prosecution used perjured or erroneous testimony were speculative and unsupported by the evidence. Moreover, any use of false testimony by the government was unknowing and the defendant was unable to establish that barring such testimony would probably result in an acquittal on retrial.

T.W. Tierney, CA-8, 91-2 USTC ¶50,509.

The convictions of individual taxpayers for filing false corporate returns, aiding and assisting in the preparation of false corporate returns, and conspiracy were upheld. The trial court did not abuse its discretion by admitting daily sales sheets as properly authenticated business records because the sales sheets were delivered by the defendants' attorney pursuant to a subpoena and were identified by government witnesses.

C.W. Lawrence, Jr., CA-7, 91-2 USTC ¶50,522.

An individual's conviction for filing false tax and information returns was upheld. At trial, the taxpayer failed to properly preserve the issue of whether the evidence was sufficient to support the jury's findings. Even if the issue had been properly preserved, the evidence was sufficient to permit a reasonable trier of fact to convict the taxpayer. After the taxpayer's wages and truck were seized for nonpayment of taxes, he sent letters demanding payments from a former employer, a co-worker and several IRS agents. Additionally, the taxpayer admitted that he intentionally filed false Form 1096 and Form 1099 information returns.

M.G. Kuball, CA-9, 92-2 USTC ¶50,501, 976 F2d 529.

Sufficient evidence supported an individual's conviction for willfully filing false income tax forms. Based on the individual's issuance of Forms 1099 to several IRS employees showing payments that he never made, it was reasonable for a jury to conclude that he voluntarily and intentionally violated the law and, thus, acted willfully. In addition, the false statements were material since they involved income and the computation of tax and the IRS was forced to implement special procedures to intercept the false filings.

K.H. Winchell, CA-10, 97-2 USTC ¶50,890, 129 F3d 1093.

In proving that the taxpayer filed a false return, the IRS was not required to establish that it was a joint return, as described in the indictment. Further, the variance between proof of the taxpayer's unsigned return and indictment allegations of willful tax evasion and filing of a false return was not material. Since the taxpayer was aware of the charges against her and of the particular evidence that supported those charges, she was not prejudiced by use of this evidence.

S.N. Robinson, CA-5, 92-2 USTC ¶50,565, 974 F2d 575.

A doctor was properly convicted of willfully filing or assisting in filing false tax returns because evidence on the improper deduction of depreciation on a car did not constitute a constructive amendment of the indictment or a prejudicial variance. The evidence was properly admitted because it went directly to the issue of whether a physician understated his total income and did not prove facts that were materially different from those alleged in the indictment or modify essential elements of the charged offense.

M.K. Tandon, CA-6, 97-1 USTC ¶50,373, 111 F3d 482.

An architect's conviction for filing a false return was affirmed. Evidence presented in the case, including the books and testimony of the taxpayer's bookkeeper and accountant, was sufficient to satisfy the reasonable doubt standard. Amounts posted in the taxpayer's books and records as professional legal fees were actually used by the taxpayer for an investment in a horse partnership. Although the taxpayer contended that the conviction should have been upheld only if the evidence inexorably supported an inference of guilt, this higher standard of proof is applicable in cases involving embezzlement, not in cases alleging the filing of false returns.

J.G. Crozier, CA-2, 93-1 USTC ¶50,219, 987 F2d 893.

The taxpayer's motion to suppress statements made to IRS agents in the course of their civil and criminal investigations of the taxpayer was denied. The taxpayer's contention that an IRS agent assured his accountant that no criminal charges would be filed was unsupported.

L.A. Robinson, DC Miss., 93-1 USTC ¶50,213, 811 FSupp 1174.

A tax preparer's conviction for aiding and abetting the preparation of false returns was remanded so that the trial judge could redetermine whether prior year tax returns filed by the government's taxpayer witnesses were material to his defense. In denying the preparer's request for production, the trial court improperly imposed a "heavy burden" standard of materiality. First, similar treatment of a similar issue in a prior year, as to which the tax preparer played no role, might suggest that the falsify originated with the taxpayer rather than the preparer. Second, if a taxpayer testifies that he supplied the return preparer with accurate information, prior returns are a potential device for impeachment. Finally, such erroneous nondisclosure as to any taxpayer upon which the conviction was based might have undermined the government's entire case.

C.N. Lloyd, Jr., CA-D.C., 93-1 USTC ¶50,317, 992 F2d 348.

A federal district court had jurisdiction over an individual who was prosecuted for making false statements and attempting to interfere with the administration of the IRS. His claim that, as a natural born citizen of Montana, he was a nonresident alien exempt from the tax laws lacked merit. Further, sufficient evidence supported his conviction. His admission that he filed a false return was not excused by his genuine belief that the tax laws did not apply to him and that filing a false return would prompt an investigation which would thwart an overthrow of the government.

L.T. Hanson, CA-9, 94-1 USTC ¶50,075, 2 F3d 942.

An office manager's conviction for filing a fraudulent return was upheld because sufficient evidence of her consistent pattern of underreporting large amounts of income supported the inference of willful behavior. Additionally, the trial court did not abuse its discretion in allowing an IRS revenue agent to testify as an expert in the calculation of income and taxes.

E.A. Pratt Stokes, CA-5, 93-2 USTC ¶50,545, 998 F2d 279.

A trial court did not commit reversible error by excluding certain testimony proffered by married taxpayers who were ultimately convicted of filing incomplete income tax returns. The trial court erred in treating a third party's testimony on whether the husband possessed the requisite guilty state of mind as inadmissible hearsay because it was offered only to demonstrate its effect on his state of mind, as opposed to proving the truth of the matter asserted. However, such error was harmless because the evidence of guilt with respect to the husband was overwhelming and did not deprive him of the ability to put on a defense. The trial court's error was also harmless with respect to the wife because it did not affect her ability to present a defense.

L.D. Hanson, CA-7, 93-2 USTC ¶50,558.

A construction equipment dealer's conviction for tax fraud was upheld even though the government cross-examined him about his alleged bank fraud. Since the dealer placed his credibility in issue when he chose to testify, the government was entitled to cross-examine the dealer on his alleged bank fraud in an attempt to impeach him through evidence of specific instances of dishonesty that would tend to prove untruthfulness.

M.A. Chevalier, CA-7, 93-2 USTC ¶50,581.

Evidence presented by the government against two real estate construction business owners convicted of filing and subscribing false income tax returns was sufficient to establish guilt beyond a reasonable doubt. Although most of the evidence was circumstantial and subject to differing interpretations, a reasonable jury could have found the individuals guilty.

J.D. Morris, CA-11, 94-1 USTC ¶50,234, 20 F3d 1111.

The trial court did not abuse its discretion when it admitted a transcript of a taped interview between a dentist and his former wife's attorney into evidence at the dentist's trial for willful failure to pay taxes and filing a false income tax return. The taxpayer's statements were not hearsay, the transcript was adequately authenticated through testimony of the transcriber and the attorney, and the best evidence rule was not violated because the original tape had been erased. Finally, the government did not offer false evidence because the dentist's disagreement with an IRS agent's characterization of certain amounts as income did not convert the agent's testimony into a falsehood.

W.L. Workinger, CA-9, 96-2 USTC ¶50,402, 90 F3d 1409.

An attorney was properly convicted of conspiracy for attempting to hide his client's business income from the IRS, and the client was properly convicted of conspiracy and filing false tax returns. A pretrial ruling barring the client from introducing evidence of business deductions unless he established that he knew he was entitled to claim them before the returns were filed was not erroneous since the amount of taxes owed was irrelevant to the tax fraud. Other claimed errors with respect to prosecutor's comments and jury instructions did not warrant reversal of the convictions.

J.C. Minneman, CA-7, 98-1 USTC ¶50,347, 143 F3d 274. Cert. denied, 3/8/99.

Sole stockholders who made personal car payments using unreported business income were properly convicted of willfully filing false income tax returns for three tax years. The district court correctly permitted an IRS agent to give expert opinion testimony that was limited to factual determinations regarding the process by which summaries of invoices, sales tickets, and checks were compiled.

J.P. Proctor, CA-10 (unpublished opinion), 98-2 USTC ¶50,884, aff'g an unreported District Court decision.

The conviction and sentence of a former judge and compulsive gambler for filing false tax returns was upheld. The trial court did not abuse its discretion in excluding expert testimony regarding compulsive gambling, expert testimony on tax and accounting laws or testimony concerning the reasonableness of the taxpayer's belief that he could net out gambling wins and losses.

W.L. Scholl, CA-9, 99-1 USTC ¶50,230, 166 F3d 964.

Search warrants issued in connection with an IRS investigation of an individual who marketed a book promoting the evasion of taxes were sufficiently specific. The warrants limited the search to documentary evidence related to violations of the Code concerning possible conspiracy to evade taxes. The fact that the warrant failed to name the taxpayer or his wife was not fatal to its validity since it only had to identify the place to be searched and the targets of seizure.

D.L. Leveto, DC Pa., 2000-1 USTC ¶50,278. Aff'd on another issue, CA-3, 2001-2 USTC ¶50,536.

Evidence that a taxpayer voluntarily provided to an IRS agent during a civil investigation was properly admitted in the taxpayer's subsequent trial for criminal tax fraud. The taxpayer alleged that the IRS agent in charge of the civil investigation violated the Internal Revenue Manual by continuing the investigation after she had evidence of criminal fraud. Although the agent had information that the taxpayer used her corporation to pay her personal expenses, she did not have evidence indicating that the taxpayer acted with criminal intent.

I.L. McKee, CA-6, 99-2 USTC ¶50,867, 192 F3d 535.

Evidence relating to willfulness that was uncovered pursuant to a search warrant authorizing the seizure of bank records was properly admitted against an accountant who was convicted of filing a false return. Although the warrant may have been insufficiently specific, it was executed by an IRS agent who acted on a good-faith belief that it was valid. Moreover, he was intimately involved in the investigation of the taxpayer prior to the execution of the warrant and in the preparation of an affidavit in support of the warrant, which gave him obvious knowledge of the crimes that were under investigation.

A.L. Guidry, CA-10, 2000-1 USTC ¶50,118, 199 F3d 1150.

Evidence was properly admitted and excluded from a return preparer's trial for filing false returns and assisting in the preparation of false returns. A revenue agent's testimony that the false information she provided was material to the computation of tax liability was admissible because it merely assisted the jury in understanding the facts. Documents that her mother voluntarily surrendered to an IRS agent were also admissible absent a showing that the agent made any misrepresentations to obtain them. Evidence that her husband once forced his former wife to sign a false return was properly excluded. While the husband may have forced her into the return preparation business and appropriated her proceeds, there was no evidence that he forced her to prepare any of the returns at issue.

B.K. Scarberry, CA-10 (unpublished opinion), 2000-1 USTC ¶50,272, 208 F3d 228.

Married taxpayers who filed tax returns on which they claimed that their wages constituted nontaxable compensation were properly convicted of filing false returns. The trial court's admission into evidence of the couple's tax return bearing the stamp "Frivolous Tax Penalty Assessed" was harmless error because it was more probable than not that the evidence did not materially affect the verdict.

B.R. Rosco, CA-9 (unpublished opinion), 2000-1 USTC ¶50,355. Aff'g an unreported District Court decision.

Evidence indicating that a taxpayer was not a partner in a company supported his conviction for filing a false tax return. The taxpayer argued that he was a partner and any funds he received from the company were nontaxable partnership distributions. However, evidence indicated that the taxpayer was never a partner, and partnership returns that identified the taxpayer as a partner had a tax avoidance motive and lacked economic substance.

L.L. Worman, CA-10 (unpublished opinion), 2000-1 USTC ¶50,359, 210 F3d 391. Aff'g an unreported District Court decision.

The president of a steel cutting company that failed to report advances that it received from a purchaser of scrap metal was properly convicted of signing false corporate returns. Evidence regarding unreported advances received by the corporation during a prior tax year and the evasion of the cash transaction reporting requirement was properly admitted because it was relevant to the issue of willfulness.

L. Ristovski, CA-6 (unpublished opinion), 2000-1 USTC ¶50,409, 211 F3d 1271. Aff'g an unreported District Court decision.

Insufficient evidence existed to support a conviction against a co-conspirator for assisting in the preparation of false returns for a business in connection with a tax evasion scheme. He did not prepare the returns and his mere association with the business was inadequate to establish a violation of Code Sec. 7206.

T.C. Gaskill, CA-9 (unpublished opinion), 2000-2 USTC ¶50,702. Rev'g and rem'g in part an unreported District Court decision.

A motion to suppress documents and statements taxpayers gave to an IRS Agent in the course of a civil investigation that were subsequently used to convict them in criminal fraud proceedings was properly denied. There was no evidence that the agent improperly failed to refer the matter for criminal investigation or otherwise cease the civil investigation once there were firm indications of fraud. Moreover, the agent was not in uniform, and was unarmed and unaccompanied at the time he interviewed the taxpayers. Thus, they were not disadvantaged or under pressure to answer his questions.

K.P. Kontny, CA-7, 2001-1 USTC ¶50,197. Cert. denied, 5/14/2001.

The appellate court rejected taxpayer's argument that the trial court's exclusion of a tax expert's testimony concerning her ignorance of the law constituted an abuse of discretion. The expert was consulted only for trial and had no involvement in the taxpayer's preparation of her return. Thus, he could not have offered testimony as to her confusion or good faith in failing to report rental income.

S.F. Rosales, CA-9 (unpublished opinion), 2001-1 USTC ¶50,397, 7 FedAppx 766, aff'g an unreported District Court decision.

Convictions for conspiracy to defraud the government were upheld against sibling owners and managers of a family construction business who attempted to pay employees significant overtime wages off-payroll without withholding taxes, skimmed cash from their business, and failed to report income. The taxpayers signed paychecks, reviewed them, made changes and advised employees of the benefit of making purported pre-tax mortgage payments.

J.A. Gambone, Sr., CA-3, 2003-1 USTC ¶50,162, 314 F3d 163.

Evidence was sufficient for a jury to find that the signatures on the false returns belonged to the taxpayer and to support his conviction of conspiracy to defraud the government and filing false personal and corporate tax returns.

G. Rhodis, CA-2 (unpublished opinion), 2003-1 USTC ¶50,197, 58 FedAppx 855, aff'g in part and rem'g in part an unreported District Court decision.

A trial court did not abuse its discretion in admitting evidence in a tax fraud proceeding that showed how a taxpayer handled the proceeds from the sale of his home in a manner designed to deceive the IRS. The evidence, which demonstrated an intent to defraud the government, was relevant, did not cause unfair prejudice to the taxpayer, and did not affect his substantial rights.

F.F. Paul, CA-6 (unpublished opinion), 2003-1 USTC ¶50,222, aff'g, per curiam, an unreported District Court decision.

An individual's conviction for preparing or assisting in the preparation and presentation of fraudulent tax returns was upheld. The trial court's decisions on the admissibility of evidence, as well as its denial of a motion for a mistrial, were not abuses of discretion, as the court did not act "arbitrarily or irrationally." Furthermore, requests for particular jury instructions were either properly denied, or their denial was not reversible error.

W.A. Montes, CA-4 (unpublished opinion), 2003-1 USTC ¶50,274, aff'g, per curiam, an unreported District Court decision.

Evidence presented by the government against an individual was sufficient to sustain a jury's verdict to convict him of conspiracy to defraud the government and two counts of aiding and assisting in the preparation or presentation of false income tax returns. Based on the testimony of the individual and several of his clients, it was reasonable for the jury to find that the tax preparer converted ordinary personal expenditures into tax deductible business expenses.

D.S. Fletcher, CA-8, 2003-1 USTC ¶50,283, 322 F3d 508.

A federal district court properly convicted a tax preparer of procuring the presentation of tax returns containing false statements by fraudulently inflating taxpayers' deductions. The preparer's appeal asserted that there was insufficient evidence to support six of his convictions. However, the weight of the evidence, including the testimony of witnesses for whom he had prepared returns, was sufficient to support a finding of the preparer's guilt.

W.M. Hayes, CA-4, 2003-1 USTC ¶50,312, 322 F3d 792 .

Sufficient evidence existed to find that an individual taxpayer willfully filed false returns for two tax years. During the years in issue, the taxpayer accepted and cashed checks from two corporations owned and controlled by her father, claiming the proceeds as "wages" on her tax returns, even though she had done no work for the two companies. Based on the evidence presented by the government, the jury reasonably could have found that the taxpayer knew of her obligation to accurately report income, she knew that the money she was receiving from the companies was not "wages", and she repeatedly attempted to cover up the truth about her relationship with the businesses.

L.A. Boulerice, CA-1, 2003-1 USTC ¶50,392, 325 F3d 75.

Two individuals' convictions for aiding and abetting in the fraudulent preparation of tax returns were upheld. Evidence of a settlement agreement between the IRS and the individuals, which disallowed 80 percent of the deductions that the IRS claimed to be fraudulent, was properly excluded. The evidence's probative value was substantially outweighed by the danger of confusion its introduction would have caused.

B.F. Manko, CA-2 (unpublished opinion), 2003-1 USTC ¶50,461, 63 FedAppx 570, aff'g an unpublished District Court decision.

Any error was harmless in the face of overwhelming evidence against the taxpayer.

W.N. Jackson, CA-2 (unpublished opinion), 2003-1 USTC ¶50,478, 65 FedAppx 754, aff'g an unreported District Court decision.

Tax shelter promoters willfully aided clients in filing false or fraudulent tax returns in violation of Code Sec. 7206(2). The promoters charged hundreds of clients to set up and manage trusts known as Unincorporated Business Organizations (UBOs), which purportedly avoided taxes on income streamed into them. The government sufficiently proved the three elements of a Code Sec. 7206 violation.

D.L. Smith, CA-9, 2005-2 USTC ¶50,565, 424 F3d 992.

Evidence that a tax return preparer agreed to pay 60 penalties for understating tax liability for multiple tax years was admissible in a criminal trial, in which the tax return preparer was charged with aiding the preparation and presentation of false tax returns. The imposition and payment of the penalties was material to the criminal case, was reasonably proximate to the criminal indictment and the circumstances surrounding the imposition of the penalties was sufficient to prove the prior bad acts. Likewise, evidence of a civil judgment against the tax preparer obtained by clients was admissible because it formed the factual setting of the crime in issue.

R.E. Reiss, DC Minn., 2005-2 USTC ¶50,538.

The Fourth Amendment rights of two brothers were not violated when notebooks containing accounting information were searched; thus, their request to suppress the contents of the notebooks as evidence of tax fraud and evasion was correctly denied. They had no expectation of privacy in the notebooks after the notebooks were given to a police officer for fingerprinting during a burglary investigation. They voluntarily allowed a police officer to take the notebooks in their entirety and hold them for several days and did not place any limitations on access to the notebooks. Further, one of the brothers permitted an officer who had knowledge of an IRS investigation of them to make copies of the notebooks. He did not keep the contents to himself, separate the notebook covers or secure the contents of the notebook so that only the covers could be accessed.

Y.B. Yang, CA-7, 2007-1 USTC ¶50,395.

Evidence of prior bad acts was properly admitted during a tax return preparer's criminal trial on charges of aiding and assisting in the preparation of false federal income tax returns. The evidence possessed significant probative value.

R.E. Reiss, CA-8, 2007-2 USTC ¶50,532.

Evidence provided by an individual to an IRS agent during a civil audit of his federal income tax returns that subsequently resulted in his indictment for tax evasion was not suppressed. He failed to prove that the IRS agent induced his compliance through false promises that his cooperation would result solely in a civil tax assessment and that the case would conclude after he turned over the requested records. The IRS agent never stated that he would not be prosecuted if he cooperated. Also, the agent never promised that she would not refer his case to the Criminal Investigation Division, but maintained that any decision was dependent upon a review and final determination.

J.F. Greve, CA-7, 2007-2 USTC ¶50,547.

Alvin S. Brown, Esq.
Tax attorney

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