Monday, June 16, 2008

Willful Failure to File Return, Supply Information, or Pay Tax: Failure to report income

Taxpayer was a close friend of prominent political figures, and by virtue of his public offices was able to grant them favors in the way of contracts for materials and machinery in the construction of public works. The evidence sustains his conviction for failure to report the sums he received.

Murray, CA-8, 41-1 USTC ¶9247, 117 F2d 40.

Barrow, CA-5, 49-1 USTC ¶9112, 171 F2d 286.

Tax evasion conviction was upheld for failure to include in income a fee for arranging a mortgage loan.

B. Cohen, CA-5, 66-2 USTC ¶9560, 363 F2d 321.

Conviction of taxpayer who failed to report as taxable income the amounts extorted from another was upheld.

Rutkin, 52-1 USTC ¶9260, 343 US 130.

[Note: See also Rutkin at ¶41,318.20. --CCH.]

But a conviction for embezzling done before Rutkin was decided when Wilcox, 46-1 USTC ¶9188, was in effect (holding that embezzled funds are not taxable) was reversed since a willful attempt to evade could not be established so long as the law contained the gloss put upon it by Wilcox.

E.C. James, SCt, 61-1 USTC ¶9449, 81 SCt 1052.

Since funds which the taxpayer failed to report in his income tax returns were embezzled funds, and the embezzlement occurred before Wilcox was overruled, the taxpayer could not be prosecuted for willful evasion of income tax for his failure to include the funds in his tax returns.

M. Pitoscia, DC, 65-1 USTC ¶9281, 238 FSupp 135.

Conviction for failure to report certain funds which taxpayer acquired through his employment before James, was sustained, since the taking of the fund was not technically an embezzlement under local law.

R.C. Jannsen, CA-7, 65-1 USTC ¶9142, 339 F2d 941.

Failure to report funds embezzled 3 days before James was decided was willful evasion of income tax for the year 1961.

H.B. Nordstrom, CA-8, 66-1 USTC ¶9437, 360 F2d 734. Cert. denied, 385 US 826.

A taxpayer who acquired property and money by fraud and deceit, obtained such funds unlawfully in the first instance; therefore the Wilcox doctrine was inapplicable and the taxpayer could be found guilty of filing fraudulent returns as a result of his failure to include these amounts in gross income.

H.H. McGuire, CA-6, 65-1 USTC ¶9299, 347 F2d 99. Cert. denied, 382 US 826.

W.J. Dawson, CA-2, 68-2 USTC ¶9527, 400 F2d 194.

C. Rosenthal, CA-2, 73-1 USTC ¶9135, 470 F2d 837.

Conviction for tax evasion was reversed and a new trial was ordered, to find out if unreported income was embezzled funds or income from some other source, following James, above.

D.D. Beck, CA-9, 62-1 USTC ¶9227, 298 F2d 622.

To the contrary, where reliance on the James decision was first presented on appeal.

B.C. Wallace, CA-4, 62-1 USTC ¶9330, 300 F2d 525. Cert. denied, 370 US 923.

Dismissal of indictment for tax evasion before determining whether or not defendant had an interest in part of a fund allegedly embezzled was premature.

O.P. Colamatteo, CA-7, 63-1 USTC ¶9206, 312 F2d 154.

Proof that taxpayers deliberately omitted to report side payments received in connection with over-ceiling sales of whiskey and that after investigation had begun each taxpayer filed an amended return disclosing a part of the income previously omitted was sufficient.

Rosenblum, CA-7, 49-1 USTC ¶9314, 176 F2d 321. Cert. denied, 338 US 893.

Conviction for failure to report suppliers' cash discounts as income was sustained. Since the case was built on the correct amount of the discount receipts, the government was not required to prove the correct amount of the purchases, even though such discounts are normally reflected as reductions of purchases.

A.L. Wainwright, CA-10, 69-2 USTC ¶9503, 413 F2d 796. Cert. denied, 396 US 1009.

Circumstantial evidence supported the District Court's determination that the taxpayer made no agreement to repay unreported income from trade-outs in which businesses exchanged merchandise for newspaper advertising.

H.B. Brown, Jr., CA-10, 71-2 USTC ¶9557, 446 F2d 1119.

Taxpayer's conviction for failing to report long-term capital gain by using false basis was sustained.

R.R. Krilich, CA-7, 72-2 USTC ¶9767, 470 F2d 341. Cert. denied, 411 US 938.

Taxpayer's tax evasion conviction for fraudulently understating income was affirmed on appeal.

H.H. Feaster, CA-5, 74-1 USTC ¶9472, 494 F2d 871.

F.E. Burkhart, CA-6, 74-2 USTC ¶9661, 501 F2d 993.

A.E. Marabelles, CA-9, 84-1 USTC ¶9189.

T.J. Barrow, CA-6, 97-2 USTC ¶50,558, 118 F3d 482. Cert. denied, 1/16/2001.

Taxpayer's conviction of willfully and knowingly attempting to evade and defeat federal income taxes for two years by omitting from gross income money received as salary was upheld. The court held that the taxpayer knew that money received from a partnership was income and that he deliberately omitted such sums from his returns. Such payments could not be construed as a return of equity since the taxpayer, as a limited partner, had not made any capital contributions and was not responsible for any partnership losses.

T.M. Fahey, CA-2, 75-1 USTC ¶9102, 510 F2d 302.

Taxpayer's conviction for willfully attempting to evade taxes by concealing his Irish Sweepstakes winnings of approximately $130,000 in a foreign bank account was affirmed on appeal.

F.L. McNulty, CA-9, 76-1 USTC ¶9215, 528 F2d 1223. Cert. denied, 425 US 972.

Although an individual correctly and timely reported the amount of tax due, his concealment of assets alone was a sufficient act to support a conviction for tax evasion. Congress did not intend that Code Sec. 7206(4) be the sole remedy for concealment of assets or be interpreted to limit the scope of Code Sec. 7201.

F.L. Hook, CA-6, 86-1 USTC ¶9179, 781 F2d 1166.

It was not shown that a payment received from a corporation for which the taxpayers were selling products, which payment was the only income they failed to report, was a discount or rebate rather than a bonus payment.

M.L. Schutterle, CA-8, 78-2 USTC ¶9773, 586 F2d 1201.

No error was committed when the defendant was found guilty of tax evasion for the years 1975 and 1976. Although the defendant had formal legal control over all of certain unreported funds prior to 1976, that did not preclude a conviction for 1976 because there had been an issue of facts as to when he felt free to use the funds. The funds in his bank account did not result in reportable income until he had "practical control" over the funds.

D. Dixon, CA-11, 83-1 USTC ¶9213.

Where the government in a tax evasion prosecution established that a resident alien received unreported income and that his nondisclosure resulted in a tax deficiency, the resident alien did not negate the deficiency by claiming a foreign tax credit when there had been no firmly established taxable amount owed the Dominican Republic and determined by it before the discovery of the federal tax deficiency.

J.M.A. Cruz, CA-11, 83-1 USTC ¶9216, 698 F2d 1148. Cert. denied, 104 SCt 391.

The conviction of an engineering president for failure to report income on his individual income tax returns was upheld. The firm's general business practices included depositing in the corporation's account payments received for engineering services rendered to its clients. For the tax years at issue, a number of the clients' checks were either cashed by the president or deposited in his personal checking account.

T.P. Meyer, CA-8, 87-1 USTC ¶9132, 808 F2d 1304.

A personal injury lawyer who concealed and attempted to conceal the nature, extent, and ownership of his assets by placing his assets, funds, and other property in the names of others and by transacting his personal business in cash to avoid creating a financial record was properly convicted by a jury on three counts of willful attempt to evade and defeat the payment of his personal income tax.

E.J. Conley, CA-7, 87-2 USTC ¶9469, 826 F2d 551.

The conviction of an individual for tax evasion was upheld. The taxpayer forged documents charging personal expenses to her family corporation, failed to report interest income on 10 money market accounts and deposited large amounts of cash that were not attributable to any known source into her bank accounts.

R.R. Walker, CA-8, 90-1 USTC ¶50,084, 896 F2d 295.

An individual's conviction for tax evasion was upheld. The government properly determined that the individual had unreported income under the cash expenditures and bank deposits method of reconstructing income. The individual's cash on hand at the beginning of each year was established with reasonable certainty based on the individual's personal records and safety deposit box access records.

C.T. Conaway, CA-5, 94-1 USTC ¶50,009, 11 F3d 40.

The evidence was sufficient to sustain an individual's conviction for willful failure to file tax returns and tax evasion. He could not claim that his taxes were not deficient by treating fees received from an insurance adjusting company as a nontaxable settlement award for personal injuries. The company stated that no settlement was ever agreed upon, and, even if one had been reached, the damages would have flowed from a breach of contract.

W.J. Benson, CA-7, 95-2 USTC ¶50,540, 67 F3d 641.

There was sufficient evidence for a jury to find that the majority shareholder, president, and director of a corporation was guilty of tax evasion based on his exercise of control over a liquidating dividend that was due another shareholder. The money was not used for the alleged purpose of providing a contingency fund to protect former officers and directors from claims arising out of the liquidation but, instead, was for the taxpayer's benefit.

R.P. Mueller, CA-11, 96-1 USTC ¶50,190.

Insufficient evidence was presented to support married taxpayers' convictions for tax evasion where the government failed to prove the required existence of a tax deficiency. Under the "no earnings and profits, no income" rule established in P.F. DiZenzo, CA-2, 65-2 USTC ¶9518, amounts that the couple diverted from their wholly owned corporation could not be taxable to them personally as a constructive dividend, where the company had no earnings or profits. Instead, the diverted funds constituted a nontaxable reduction of the couple's shareholder loan account.

J. D'Agostino, CA-2, 98-1 USTC ¶50,380, 145 F3d 69.

The taxpayer's contention that the bonus and interest payments were motivated solely by tax concerns and that they did not constitute taxable income and, thus, could not result in a tax deficiency, was rejected.

M.Y. Khalaf, CA-9 (unpublished opinion), 2002-1 USTC ¶50,297, aff'g an unreported District Court decision.

A federal district court properly determined the amounts embezzled by an individual from his employers. The individual produced no evidence in support of his claim that he embezzled less than the amounts alleged by the victim, and he failed to refute the reliability of the victim's allegations.

D.J. Peterson, CA-10, 2003-1 USTC ¶50,168.

An individual's conviction for filing false tax returns was not set aside because the evidence supported the jury's finding beyond a reasonable doubt that the individual's tax returns contained false information as to material matters in that he did not report income he should have reported. The evidence also showed that the individual exerted control over funds he obtained from his business trust but did not report those funds as income on his personal returns or otherwise properly account for the funds.

M.E. Diesel, DC Kan., 2006-2 USTC ¶50,398.

Two individuals who operated a printing and copying business were properly convicted for willful tax evasion. They concealed business assets using a secret bank account that was not known to their accountant and used the funds in that account for personal expenses. They also handled affairs in cash to avoid making records and repeatedly failed to report large amounts of income.

L.K. Spurlock, CA-5 (unpublished opinion), 2007-1 USTC ¶50,384, aff'g an unreported DC Texas decision.

No comments: