7206 return preparer fraud - Ratfield appeal fails

[Under section 7206 an individual was properly convicted of aiding and assisting in the preparation of false tax returns, preparing and filing false tax returns, and impeding the IRS in its due administration of the federal tax laws. IRS agents were properly allowed to remain in the courtroom during the trial after the individual invoked the rule of sequestration because they aided the orderly presentation of the case, which they could not have done without hearing the evidence introduced during the course of the trial. Evidence showing that prior to the commencement of the trial, the court held one of the individual's clients in civil contempt for violating an order to provide documents to the IRS, did not unfairly prejudice the individual. The jury indicated that the individual only impeded the IRS by filing tax returns stating zero income and zero taxes due and owing. Finally, governmental witnesses' testimonies concerning the individual's conduct and tax protestor theories were relevant to the jury's determination regarding whether he had acted in good faith. None of the witnesses actually stated that the individual was a tax protestor.

United States of America, Plaintiff-Appellee v. Louis Wayne Ratfield, Defendant-Appellant. 2009-2 USTC ¶50,592

U.S. Court of Appeals, 11th Circuit; 07-13537, August 18, 2009.

..
Before: Edmondson, Black and Siler, Circuit Judges.

Before EDMONDSON, BLACK and SILER, * Circuit Judges.

PER CURIAM: Louis Wayne Ratfield appeals his conviction for preparing and filing false tax returns, specifically, (1) aiding and assisting in the preparation of false federal tax returns for trusts and estates (IRS Form 1041), in violation of 26 U.S.C. § 7206(2) (Counts 1-20); (2) aiding and assisting in the preparation of false individual and joint federal tax returns (IRS Form 1040), in violation of 26 U.S.C. § 7206(2) (Counts 21-42); (3) filing false federal income tax returns in violation of 26 U.S.C. § 7206(1) and 18 U.S.C. § 2 (Counts 43-45); (4) impeding the Internal Revenue Service in violation of 26 U.S.C. § 7212(a) (Count 46); and (5) willfully and knowingly disobeying and resisting the lawful orders issued by a United States District Judge for the Southern District of Florida during proceedings held in United States v. Louis W. Ratfield and LWR Financial Services Trust, Case No. 01-cv-8816, by committing acts that he knew to have been enjoined, or by failing to perform acts that he had been ordered to perform, in violation of 18 U.S.C. § 401(3) (Counts 47-56). 1 A jury returned a verdict convicting Ratfield on all counts of the indictment except for Count 50. 2

We have had oral argument in this case and the parties are intimately familiar with the facts, so we will not extensively review the facts. Ratfield raises three issues on appeal: (1) whether the district court abused its discretion by allowing IRS revenue agent-witnesses to remain in the courtroom during the trial after Ratfield invoked the rule of sequestration; (2) whether the district court abused its discretion by admitting evidence showing that six years before Ratfield's trial commenced, the district court held one of Ratfield's clients in civil contempt for violating an order to provide documents to the IRS; and (3) whether the district court abused its discretion by admitting testimony from IRS agents that Ratfield was a tax protester, that his arguments were frivolous, and that trusts he set up were abusive and a sham. We address these arguments in turn.


I.


Ratfield argues the district court abused its discretion by allowing two IRS agents to remain in the courtroom after Ratfield invoked the sequestration rule, Fed. R. Evid. 615.

Rule 615 provides, in relevant part, "At the request of a party the court shall order witnesses excluded so that they cannot hear the testimony of other witnesses." Nevertheless, the rule "does not authorize exclusion of ... an officer or employee of a party which is not a natural person designated as its representative by its attorney, or [] a person whose presence is shown by a party to be essential to the presentation of the party's cause." A decision regarding who will be excused from the rule of sequestration is within the trial judge's discretion and will be reversed only upon a clear showing of abuse of discretion. United States v. Alvarado, 647 F.2d 537, 540 (5th Cir. Unit A June 1981) 3 (finding the trial court did not abuse its discretion in excusing two drug enforcement agent-witnesses from sequestration requirements).

The district court did not abuse its discretion in deciding to allow the two IRS agents to remain in the courtroom during trial. Agent Grimes testified as a fact witness, an expert witness regarding trusts and taxation, and as a summary witness regarding Ratfield's evolving theories of the taxation of common law trusts. Agent Grimes' testimony aided the jury in understanding the significance of Ratfield's statements, the testimony of the other revenue agents, and the testimony of Ratfield's clients. Her testimony also permitted the other revenue agents to testify primarily as fact witness and avoid repetitive testimony regarding tax laws. Agent Grimes summarized Ratfield's evolving theories regarding the taxation of common law trusts, based on the testimony of other witnesses and documents introduced into evidence. 4 She could not have done so had she not heard the evidence introduced during the course of the trial.

Agent Lottman testified about his calculation of Ratfield's taxable income and also as a summary witness regarding the total tax loss to the Government. 5 There was little, if any, overlap in the testimony of Agents Grimes and Lottman because they focused on different aspects of the case. Consequently, we find unpersuasive Ratfield's contention they tailored their testimony to bolster each other or the testimony of the eleven other IRS agents, who testified regarding their audits of Ratfield's clients and their individual dealings with Ratfield.

The jury was able to view and assess the credibility of these witnesses. The district court's decision to allow Agent Grimes and Agent Lottman to remain in the courtroom aided the orderly presentation of the case. There were adequate grounds to permit both IRS agents to remain in the courtroom, so we find no abuse of discretion in excusing them from the sequestration rule.


II.


Ratfield argues the district judge abused his discretion by allowing the jury to hear evidence that he had previously decided the issues against the defendant's position in a prior, related case. According to Ratfield, the introduction of this evidence, which concerned one of the Government's witnesses, was so prejudicial as to make the trial unfair. Additionally, he argues the attempt at a curative instruction was insufficient to cure the prejudice.

District court rulings on the admissibility of evidence are reviewed for a clear abuse of discretion. United States v. Brannan, 562 F.3d 1300, 1306 (11th Cir. 2009). In determining whether the district court erred in failing to exclude relevant evidence under Fed. R. Evid. 403, we give deference to the discretion of the district judge, looking "at the evidence in a light most favorable to its admission, maximizing its probative value and minimizing its undue prejudicial impact." United States v. Elkins, 885 F.2d 775, 784 (11th Cir. 1989).

Ratfield fails to show how he was unfairly prejudiced by Frederick Crawford's testimony, which was only relevant to Count 46, impeding the IRS in violation of 26 U.S.C. § 7212(a). During trial, the Government introduced court documents, which had been signed by Judge Hurley six years earlier, that included (1) an order to Crawford, one of the Government's witnesses in Ratfield's case, to produce documents to the IRS, (2) an order to show cause related to the order to produce documents, and (3) an order incarcerating the witness for failure to comply. Ratfield argues Crawford and the Government purposefully mentioned the judge by name numerous times during the testimony to prejudice Ratfield. After Ratfield objected, Judge Hurley instructed the jury that they should not take it as any indication of what he thinks their verdict should be in the case. The judge then instructed the jury as follows:
Ladies and gentlemen, as you can imagine, there are lots of things that come before The Court. This is the first time I realized that I had any prior involvement dealing with Mr. Crawford and Mr. Crawford's relationship with Mr. Ratfield.

I want to make sure the jury understands that they cannot in any way take that as indicating that I have any view at all in terms of what the verdict should be as to Mr. Ratfield or whether the Government has proof in terms of Mr. Ratfield's situation.

The only thing I was looking at obviously with Mr. Crawford is the statute that requires people to turn over books and records, and if they have the ability to do it and don't do it, the Court has what is called civil contempt power which effectively says to someone, if you don't turn it over, you will be held in jail until you do turn it over. It is a coercion to say to somebody you have the key to the jail cell yourself, you get out by turning over the records if you have them.

I want to be very clear. I want to really emphasize to the jury they should not in any way, number one, consider that I have any view at all on the merits in terms of the charges against Mr. Ratfield. I assure you I do not. Those are matters for you, the jury, to decide. The fact that there is some prior proceeding that was related principally to Mr. Crawford as he indicated to us.

There is no reason to conclude the jury did not follow the district court's instructions and consider Crawford's evidence only with respect to Count 46 and not with regard to the criminal contempt charges. 6 Moreover, the jury indicated on the special verdict form, that the only manner in which Ratfield impeded the IRS was by filing tax returns stating zero income and zero taxes due and owing. Therefore, the district court did not abuse its discretion in admitting the evidence.


IIII.


Ratfield argues he was unfairly prejudiced when numerous IRS agents were permitted to testify that he was a tax protester, that his arguments were frivolous, and the trusts he set up were abusive and a sham. Ratfield also contends the prejudice was compounded when the judge instructed the jury that he was allowing the testimony about Ratfield being a tax protester because the good faith defense is not available to someone making tax protester arguments.

In determining whether the district court erred in failing to exclude relevant evidence under Rule 403, we give deference to the discretion of the district judge, looking at the evidence in a light most favorable to its admission, and will reverse only upon a clear showing of abuse of discretion. Elkins, 885 F.2d at 784; Brannan, 562 F.3d at 1306.

The district court did not abuse its discretion in allowing the IRS agents' testimony. At trial, the ultimate issue the jury decided with respect to the charges relating to the filing of false tax returns (Counts 1-46) was whether Ratfield acted in good faith. Contrary to Ratfield's claims, none of the Government's witnesses testified Ratfield was actually a tax protester. The record shows that Dr. Olson, one of Ratfield's clients, testified that he asked Ratfield if he wanted to go down the path of what looked like being a tax protester. Agent Grimes testified the arguments Ratfield made to the IRS were "protester type arguments."

Likewise, none of the witnesses opined that Ratfield's arguments were frivolous in the sense that he did not have a good faith belief in them. Instead, they testified they treated his arguments as frivolous, which meant they were not required to provide a point-by-point refutation to his theories on income taxation or his challenges to their authority to conduct audits.

Agent Grimes explained that the IRS defined an "abusive trust" as a trust set up to avoid taxes. The other agents accurately applied the terms "sham" and "abusive" in that manner in their testimony. The IRS agents testified that, based upon their training and experience as revenue agents, they recognized the trusts Ratfield had set up for his clients were abusive because the person who controlled the trust was also the beneficiary. Moreover, the evidence was overwhelming that Ratfield set up the trusts so that he and his clients could reduce or eliminate their income tax payments.

The only issue was whether Ratfield acted in good faith. The district court gave a comprehensive instruction on the good faith defense and specifically instructed the jury:
Let me tell you, I've said before that in this tax area, the Government must prove that someone acted willfully.

When the issue of good faith has been raised, that requires the Government to prove that the person did not have a good faith subjective belief that they were following the law or that, to show that they misunderstood the law.

Now, I've explained this before. The reason for this in the one area of the law is that Congress recognizes that the tax laws are complex, so if somebody has a good faith belief that they are not violating the law, even though their position may seem really quite extraordinary, if they hold that in good faith, if they really believe that, that is a complete defense.

Now, I'm allowing this testimony about tax protest in because that good faith defense is not available if what someone is really doing is just acting as a tax protester.

In other words, the theory of the good faith defense is that somebody intends to follow the tax laws, but they just misunderstand them, and they in good faith believe what they are doing is not a violation of the law.

If somebody is really against paying tax at all, and they are just making up language, that good faith doesn't apply.

But I want to be sure that the jury understands these issues are issues for the jury to decide. They are factual issues.

And in allowing the agent to testify about this concept, I am not in any way suggesting that you need to accept these categorizations.

It is for the jury to make those ultimate determinations as to whether the Government has or has not proven that Mr. Ratfield did not have a good faith belief, and again, it will be for the jury to decide whether this tax protester issue is in place in this case or not.

Based on our review of the record, the Government's witnesses did not opine whether Ratfield acted in good faith. The witnesses' testimony concerned Ratfield's conduct, his evolving theories on the IRS's authority to tax and the taxation of trusts and the fact that they advised him his theories lacked any support in the law. This testimony was relevant to the jury's determination whether Ratfield acted in good faith. Ratfield's argument he was unfairly prejudiced by the IRS agents' testimony and the jury instruction on the good faith defense is without merit. We conclude the district court did not abuse its discretion.

AFFIRMED.

* Honorable Eugene E. Siler, Jr., United States Circuit Judge for the Sixth Circuit, sitting by designation.

1 On March 15, 2007, the district court granted the Government's motion to dismiss Counts 16, 21, 27, 29 and 36 of the indictment with prejudice.

2 The jury failed to indicate a verdict for Count 50 on the verdict form, so it was dismissed with prejudice.

3 In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), this Court adopted as binding precedent all decisions of the former Fifth Circuit handed down prior to the close of business on September 30, 1981.

4 In tax evasion cases, courts permit IRS agents to testify as summary witnesses. See, e.g., United States v. Stierhoff, 549 F.3d 19, 28 (1st Cir. 2008) ( "We hold, therefore, that in a tax evasion case, a summary witness may be permitted to summarize and analyze the facts of record as long as the witness does not directly address the ultimate question of whether the accused did in fact intend to evade federal income taxes."); United States v. Gold, 743 F.2d 800, 817 (11th Cir. 1984) ( "[T]his court has expressly approved the use of expert legal testimony in a case where an IRS agent merely stated his opinion as an accountant with regard to the tax consequences of a transaction, and did not attempt to assume the role of the court.") (internal quotation omitted).

5 Ratfield also argues the district court erred by allowing Agent Lottman to testify as to the ultimate issue in the case, which Ratfield describes as whether he impeded the IRS from determining the correct tax due. Ratfield complains the admission of Lottman's expert opinions was unduly prejudicial, violating Fed. R. Evid. 403, and Lottman should not have been allowed to tell the jury what verdict to reach. This claim was not raised in the district court, thus it is subject to plain error review. See Fed. R. Crim. P. 52(b); United States v. Pielago, 135 F.3d 703, 708 (11th Cir. 1998).

The jury was instructed that the ultimate issue in Count 46 was whether Ratfield had specifically intended to impede and obstruct the IRS by, inter alia, having his clients file tax returns and other documents that he knew to be false and frivolous. The district court instructed the jury that in order to find Ratfield guilty of Count 46, it would have to find beyond a reasonable doubt that Ratfield knowingly endeavored to obstruct or impede the IRS and that he did so corruptly. A review of the record shows Agent Lottman did not offer any testimony regarding his opinion about what Ratfield intended, so he did not invade the jury's province as fact-finder.

6 At trial, the evidence was overwhelming that Ratfield violated the preliminary and permanent injunctions.

Evidence. --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.

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, 258 F3d 156.

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, 215 F3d 1335. 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, 232 F3d 897. 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, 238 F3d 815. 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, 57 FedAppx 597, 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, 57 FedAppx 569, 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, 478 F3d 832.

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 (unpublished opinion), 2007-2 USTC ¶50,532, 230 FedAppx 629, aff'g, per curiam, an unreported DC Minn. decision.

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, 490 F3d 566.

The president of a tax preparation business was properly convicted for aiding and abetting the filing of false tax returns and conspiring to defraud the government. The evidence at trial established that the individual, not his alleged co-conspirator, was exclusively responsible for electronically filing returns for his business and for printing refund checks for his clients. He prepared his clients' fraudulent tax returns by reporting non-existent income from another business entity, thereby increasing their earned income tax credit. Moreover, the individual consciously made attempts to conceal his conduct by making cash payments to his clients.

M. Okonkwo, CA-11 (unpublished opinion), 2007-2 USTC ¶50,624, aff'g, per curiam, an unreported DC Ala. decision.

An individual's conviction for failing to report his income received from gambling winnings and filing false income tax returns was proper. The trial court did not abuse its discretion in allowing the IRS agent to submit rebuttal evidence that detailed transactions which the taxpayer's accountant had not taken into account in determining the taxpayer's net gambling income. Since the accountant's calculations and conclusions were not fairly and adequately presented in the defendant's case-in-chief, the IRS agent's critique of that report was properly offered in rebuttal to disprove the accuracy of the accountant's calculations.

C.J. Bland, CA-6 (unpublished opinion), 2007-2 USTC ¶50,731, aff'g an unreported DC Ky. decision.

The government presented sufficient evidence to support an individual's conviction for filing false returns. The government provided his original tax returns, which stated his income, and the Forms 1040X that he later filed showing his adjusted gross income as zero. He knew his argument that domestic income of American citizens is not taxable under the Internal Revenue Code was invalid and that the amended returns he filed based on that argument were false.

C.T. Clayton, CA-5, 2007-2 USTC ¶50,775, 506 F3d 405, aff'g, per curiam, an unreported DC Texas decision.

An individual's conviction and sentence for aiding and assisting in the filing of a false income tax return was vacated and remanded for a new trial. The district court wrongfully excluded the expert testimony of the individual's psychiatrist, who offered evidence on the effect of the individual's mental disorder on his ability to form the intent to evade the tax laws. The testimony was highly probative because it would have materially assisted the jury in determining whether the individual committed a voluntary, intentional violation of a known legal duty.

L. Cohen, CA-9, 2008-1 USTC ¶50,111, 510 F3d 1114.

A federal district court properly convicted and sentenced an individual for filing false individual income tax returns because he failed to report income diverted from his company to pay off his gambling debts. The district court did not abuse its discretion when it did not admit expert psychiatric evidence and the testimony of a forensic accountant that the individual claimed would have demonstrated that he was a pathological gambler and would have rebutted the government's evidence characterizing his transactions as diversions or misappropriations. The court found that the expert evidence and testimonies were irrelevant and lacked probative value with respect to the question whether the individual possessed the specific intent to willfully file a false tax return. Moreover, the evidence, if admitted, would have confused the jury.

S.K, Hayez, CA-4 (unpublished opinion), 2008-1 USTC ¶50,137, aff'g an unreported DC N.C. decision.

The winner of a reality television show failed to establish that he was improperly convicted and sentenced for filing false tax returns. Neither he nor his witnesses proffered any testimony or produced any evidence that demonstrated his belief that he had no legal duty to pay taxes on his winnings. The trial court also properly restricted the testimony of a witness for the individual regarding the competency of the accountants who had prepared his returns since it was irrelevant to the individual's intent.

R. Hatch, CA-1, 2008-1 USTC ¶50,166, 514 F3d 145.

An individual's conviction and sentence for preparing false and fraudulent tax returns was proper. There was sufficient evidence for the jury to find that the tax returns at issue were materially false. Evidence of flight was properly admitted because of his failure to appear in court for at least one scheduled hearing. Further, the testimony of the individual's attorney on his prior willingness to plead guilty was properly admitted since the individual had explicitly waived his right to the attorney-client privilege on that issue.

P.A. Triumph, CA-2 (unpublished opinion), 2008-1 USTC ¶50,197, aff'g an unreported DC Conn.decision .

An individual's conviction for willfully assisting the filing of a false tax return was proper. A tax return was properly admitted into evidence to establish the existence of an improperly claimed deduction. Moreover, the individual had the opportunity to confront the witness who testified against him and there was sufficient evidence to support the jury's finding that the return was false.

H.S.H. Wong, CA-9 (unpublished opinion), 2008-1 USTC ¶50,205, aff'g an unreported DC Nev. decision.

An individual was properly convicted and sentenced for willfully aiding and assisting in the preparation and presentation of false tax returns. The evidence presented at trial supported her conviction because, even though the IRS was contacted and asked to disregard it, the individual had prepared a false tax return. Moreover, the individual did not dispute her involvement in the preparation of the fraudulent return.

L.A. Borden, CA-11 (unpublished opinion), 2008-1 USTC ¶50,227, aff'g, per curiam, DC Fla., 2007-1 USTC ¶50,490.

An individual was properly convicted and sentenced for making false statements and for willfully attempting to evade taxes. The evidence at trial demonstrated that the individual submitted documents purporting to be tax forms showing zero income despite receiving significant income for the tax years at issue and had signed those forms under penalty of perjury.

B.M. Parker, CA-4 (unpublished opinion), 2008-1 USTC ¶50,276, aff'g, per curiam, an unreported DC Texas decision.

A tax preparer was properly convicted and sentenced for willfully preparing false or fraudulent income tax returns. The evidence at trial clearly established that the individual willfully prepared returns containing materially false statements. Further, the court's instruction to the jury was not in error and did not affect the jury's verdict.

G.D. Goosby, CA-6, 2008-1 USTC ¶50,331.

A district court did not abuse its discretion when it admitted an IRS agent's testimony concerning the deductibility of certain expenses and the inaccuracy of some tax returns. The testimony did not improperly render legal conclusions about the facts of the case. Instead, the testimony expressed an opinion regarding the proper tax consequences of a transaction; thus, it was admissible expert evidence.

R.N. Bedford, CA-10, 2008-2 USTC ¶50,511.

Testimony by a client of a return preparer that the preparer had assisted in the preparation of her returns on which false business mileage deductions appeared was sufficient to establish the elements of the crime of willfully preparing false tax returns. The fact that the false deductions appeared on Schedule C, rather than on Schedule A and Form 2106, which were identified in the indictment, had no effect. The indictment also referred to "accompanying schedules" and that language covered the client's Schedule C. Further, the preparer was not entitled to a new trial on the ground that the IRS expert witness's testimony was false. The testimony was correct and, thus, could not have caused any prejudice.

U. Kamalu, CA-4, 2008-2 USTC ¶50,648.

An individual was properly convicted of filing a false income tax return because the evidence was sufficient to find that the individual willfully filed tax returns that he did not believe were true and correct as to every material matter. Since the individual was a successful small business owner who kept careful records and reviewed his tax returns, the jury could reasonably infer that the individual had knowledge of the documents that he signed in furtherance of his stated intent to reduce tax liability.

S.F. Creasia, CA-9, 2008-2 USTC ¶50,666.

An individual who personally prepared amended income tax returns containing false information for her clients was properly convicted of willfully aiding and assisting in the preparation of false and fraudulent income tax returns. Substantial evidence was presented from which a reasonable-minded jury could have found the defendant guilty beyond a reasonable doubt. The government's evidence established that the individual prepared the amended returns reporting inflated deductions, contributions and credits, thereby wrongly entitling her clients to become eligible for additional refunds. The individual's argument that the erroneous amounts were the result of a computer glitch was rejected. The individual had education, training and experience in the preparation of amended tax returns, knew that the deductions were false and willfully provided the inaccurate numbers.

A. Tinder, DC Iowa, 2008-2 USTC ¶50,684.

An individual's conviction on two counts of filing false income tax returns was vacated as to one count, but affirmed as to another. The indictment was insufficient to support the individual's conviction on one count because it alleged that the individual filed a false amended tax return based on the false statements contained in a schedule attached to his original return. However, the schedule, which formed an integral part of the original return, was not an integral part of the amended return. By signing the jurat on the amended return, the individual swore to the veracity of only the amended return. However, the government's evidence supported the individual's conviction on the other count.

J.D. Adams, CA-5, 2009-1 USTC ¶50,241.

The conviction of a pastor for fraudulent evasion of personal income taxes was proper. The government's evidence at trial established that the individual willfully filed tax returns in which he knowingly and significantly under-reported his income.

G.L. Clarke, CA-11, 2009-1 USTC ¶50,295.

The evidence in an individual's trial for failure to file a tax return established that he voluntarily and intentionally violated his tax reporting obligations. He had been repeatedly informed of his tax obligations and the correct method of reporting his income. The admission of transcripts from a previous criminal trial for failure to file returns was not erroneous. Since his defense was that he was unaware of any obligation to report his earnings as income, the government was entitled to introduce the transcripts, which possessed significant probative value, as evidence that he acted willfully and with knowledge of the tax laws and his reporting obligations. Therefore, he was not entitled to a new trial or a judgment of acquittal.

R. Menner, DC Va., 2009-1 USTC ¶50,305.

A couple was properly convicted and sentenced for aiding and abetting the filing of false tax returns. The couple's motion for acquittal was properly denied because the government's evidence was sufficient to sustain the guilty verdict. The trial court did not direct a guilty verdict and properly instructed the jury as to the couple's good faith defense and their reliance on the advice of an attorney, accountant or other tax expert. Third-party tax losses were properly considered at sentencing because the husband's advice to third parties was relevant conduct forming part of a related common scheme or plan. The trial court also did not impermissibly consider hearsay evidence when attributing the third-party tax losses to the individual because the testimony met the required indicia of reliability.

J. Aldridge, CA-8, 2009-1 USTC ¶50,326.

An investment advisor was properly convicted and sentenced for willful tax evasion, subscribing false tax returns, willfully failing to file timely personal income tax returns and pay taxes, and obstructing and impeding the IRS's investigation into his assets. The evidence established that he had a substantial tax debt, his returns falsely claimed entitlement to deduct net operating loss despite being informed of the disallowance of the loss, and he engaged in affirmative acts of evasion by concealing the existence of two corporate entities that were set up to avoid lawful seizure of his assets and establishing stock accounts for his children, into which he redirected his income subsequent to receiving the deficiency notice.

R. Josephberg, CA-2, 2009-1 USTC ¶50,346.

The conviction of a company's president and sole owner for filing false tax returns was upheld because the government established that the owner willfully and knowingly signed the company's tax returns, which contained deductions for payments made to non-existent subcontractors. The government showed that the owner helped create the subcontractors and their invoices and made out checks to the non-existent subcontractors that were cashed every week by the company's superintendent.

R.J. Presbitero, CA-7, 2009-2 USTC ¶50,458.

An individual was properly convicted and sentenced for aiding and assisting in the filing of false tax returns. Admission of testimonial hearsay evidence, which relied on charts and summarizing data of the national tax return statistics, was not an abuse of discretion. The evidence was relevant because it showed that the average charitable contribution on tax returns prepared by the individual and the percentage of such returns that resulted in refunds were much higher than the national average. Further, the individual's personal tax returns were admissible under the public records exception to the hearsay rule.

A.T. Stefani, CA-9, 2009-2 USTC ¶50,474.

A federal district court properly convicted an individual of filing a false tax return. A rational jury could reasonably conclude that the individual knew how much money his law practice made and that he misreported that figure on his returns willfully and with specific intent to violate the law. The individual kept a running log of the financial status of each case; therefore, he was well aware of his law firm's finances. Considering the significant disparity between the income reported by the individual and the actual income earned through his law practice, the jury was entitled to disbelieve his excuse that he relied on his hired assistant and accountant to file accurate returns and signed the returns without reading them.

S.H. Thomas, CA-5, 2009-2 USTC ¶50,510.

An individual convicted of filing false tax returns in violation of Code Sec. 7206(1) was not entitled to a new trial or judgment of acquittal because the government's evidence was sufficient to sustain a guilty verdict. The evidence established that the individual received funds that she did not report as income on her tax returns and that the individual signed her tax return knowing that it did not accurately reflect her income. Testimony that the individual made false representations regarding investments was properly introduced. The evidence was relevant to show that the individual willfully failed to include reportable income on her tax returns and was not shown to be prejudicial.

M. Mendoza, DC Ill., 2009-2 USTC ¶50,547.

An individual was properly convicted of willfully aiding and assisting the preparation of false and fraudulent tax returns. The government established that he actually prepared the fraudulent returns and was aware of their falsity. Documentary evidence, testimony of experts in fingerprint identification and electronically filed tax returns traceable to him were sufficient proof of the individual's willful participation in the preparation of the fraudulent returns. Evidence relating to the IRS's taxpayer audits and the taxpayers' subsequent amended returns and agreed deficiencies was properly admitted. The evidence was relevant and probative of the material falsity of the returns prepared by him, and its admission was not an abuse of discretion.

W. Clark, Jr., CA-5, 2009-2 USTC ¶50,539.