7203 - Bank Records &  Net Worth Increases 3 p4

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Tax Preparation
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Levy
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Frivolous Tax Argument
Interest Abatement
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Tax Reform Legislation
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Important Links


Fraud Statutes 

Additional Information:

 

7203 - Accountant-Client Privilege
7203 - Accrual Basis
7203 - Admissibility 1 p1
7203 - Admissibility 1 p2
7203 - Admissibility 1 p3
7203 - Admissibility 1 p4
7203 - Admissibility 1 p5
7203 - Admissibility 1 p6
7203 - Admissibility 2 p1
7203 - Admissibility 2 p2
7203 - Admissibility 2 p3
7203 - Admissibility 2 p4
7203 - Admissibility 2 p5
7203 - Admissibility 3 p1
7203 - Admissibility 3 p2
7203 - Admissibility 3 p3
7203 - Admissibility 3 p4
7203 - Admissibility 3 p5
7203 - Admissibility 4 p1
7203 - Admissibility 4 p2
7203 - Admissions p1
7203 - Admissions p2
7203 - Advice of Counsel p1
7203 - Advice of Counsel p2
7203 - Amendment
7203 - Appeal Right to
7203 - Appeal Timeliness
7203 - Appeal Waiver
7203 - Appeal without merit
7203 - Arrest
7203 - Fraudulent Return
7203 - Defeat & Evade Income Taxes p1
7203 - Defeat & Evade Income Taxes p2
7203 - Defeat & Evade Income Taxes p3
7203 - Defeat &  Evade Income Taxes p4
7203 - Attorney Disqualified
7203 - Attorney's Testimony p1
7203 - Attorney's Testimony p2
7203 - Attorney's Testimony p3
7203 - Attorney's Testimony p4
7203 - Bail
7203 - Bank Records &  Net Worth Increases 1 p1
7203 - Bank Records &  Net Worth Increases 1 p2
7203 - Bank Records &  Net Worth Increases 1 p3
7203 - Bank Records &  Net Worth Increases 1 p4
7203 - Bank Records &  Net Worth Increases 1 p5
7203 - Bank Records &  Net Worth Increases 1 p6
7203 - Bank Records &  Net Worth Increases 2 p1
7203 - Bank Records &  Net Worth Increases 2 p2
7203 - Bank Records &  Net Worth Increases 2 p3
7203 - Bank Records &  Net Worth Increases 2 p4
7203 - Bank Records &  Net Worth Increases 2 p5
7203 - Bank Records &  Net Worth Increases 3 p1
7203 - Bank Records &  Net Worth Increases 3 p2
7203 - Bank Records &  Net Worth Increases 3 p3
7203 - Bank Records &  Net Worth Increases 3 p4
7203 - Bank Records &  Net Worth Increases 3 p5
7203 - Bank Records &  Net Worth Increases 4 p1
7203 - Bank Records &  Net Worth Increases 4 p2
7203 - Bank Records &  Net Worth Increases 4 p3
7203 - Bank Records &  Net Worth Increases 4 p4
7203 - Bank Records &  Net Worth Increases 4 p5
7203 - Bank Records &  Net Worth Increases 5 p1
7203 - Bank Records & Net Worth Increases 5 p2
7203 - Bank Records & Net Worth Increases 5 p3
7203 - Bank Records & Net Worth Increases 5 p4
7203 - Bank Records & Net Worth Increases 5 p5
7203 - Base Sentence p1
7203 - Base Sentence p2
7203 - Base Sentence p3
7203 - Base Sentence p4
I7203 - Bill of Particluar Conspiracy
7203 - Bill of Particulars
7203 - Books and Records
7203 - Burden of going forward with evidence
7203 - Burden of Proof
7203 - Carryback Offset
7203 - Changing Plea
7203 - Character witness p1
7203 - Character witness p2
7203 - Circumstanial Evidence p1
7203 - Circumstanial Evidence p2
7203 - Circumstanial Evidence p3
7203 - Circumstanial Evidence p4
7203 - Collateral Estoppel
7203 - Collection
7203 - Commitment by U.S. Commissioner
7203 - Communication to Jury
7203 - Compromise
7203 - Consolidation
7203 - Conspiracy p1
7203 - Conspiracy p2
7203 - Conspiracy 1 p1
7203 - Conspiracy 1 p2
7203 - Conspiracy 1 p3
7203 - Conspiracy 1 p4
7203 - Conspiracy 1 p5
7203 - Conspiracy 1 p6
7203 - Conspiracy 1 p7
7203 - Conspiracy 1 p8
7203 - Conspiracy 2 p1
7203 - Conspiracy 2 p2
7203 - Conspiracy 2 p3
7203 - Constitutional Grounds 1 p1
7203 - Constitutional Grounds 1 p2
7203 - Constitutional Grounds 1 p3
7203 - Constitutional Grounds 1 p4
7203 - Constitutional Grounds 1 p5
7203 - Constitutional Grounds 2 p1
7203 - Constitutional Grounds 2 p2
7203 - Constitutional Grounds 2 p3
7203 - Constitutional Grounds 2 p4
7203 - Constitutional Grounds 2 p5
7203 - Constitutional Grounds 3 p1
7203 - Constitutional Grounds 3 p2
7203 - Constitutional Grounds 3 p3
7203 - Constitutional Grounds 3 p4
7203 - Constitutional Grounds 3 p5
7203 - Constitutional Grounds 4 p1
7203 - Constitutional Grounds 4 p2
7203 - Constitutional Grounds 4 p3
7203 - Constitutional Grounds 4 p4
7203 - Constitutional Grounds 5 p1
7203 - Constitutional Grounds 5 p2
7203 - Constitutional Grounds 5 p3
7203 - Constitutional Grounds 5 p4
7203 - Constitutional Grounds 5 p5
7203 - Constitutional Grounds 6
7203 - Contempt Finding Ag. Defendant's Counsel
7203 - Continuance p1
7203 - Continuance p2
7203 - Continuance p3
7203 - Conviction Required
7203 - Copies of Records p1
7203 - Copies of Records p2
7203 - Corporation Officer
7203 - Costs
7203 - Credit for Time Served
7203 - Criminal Contempt
7203 - Cross-Examination PART 1 p1
7203 - Cross-Examination PART 1 p2
7203 - Cross-Examination PART 1 p3
7203 - Cross-Examination PART 1 p4
7203 - Cross-Examination PART 1 p5
7203 - Cross-Examination PART 2
7203 - DefendantHaving Facts Available p1
7203 - DefendantHaving Facts Available p2
7203 - DefendantHaving Facts Available p3
7203 - Degree of Proof p1
7203 - Degree of Proof p2
7203 - Depositions
7203 - Different Statute Cited
7203 - Discovery, Scope Of
7203 - Documentary Evidence in Jury Room
7203 - Double Jeopardy 1 p1
7203 - Double Jeopardy 1 p2
7203 - Double Jeopardy 1 p3
7203 - Double Jeopardy 1 p4
7203 - Double Jeopardy 1 p5
7203 - Double Jeopardy 2 p1
7203 - Double Jeopardy 2 p2
7203 - Double Jeopardy 2 p3
7203 - Double Jeopardy 2 p4
7203 - Enhanced Sentence Sophisticated Means p1
7203 - Enhanced Sentence Sophisticated Means p2
7203 - Enhanced Sentence p1
7203 - Enhanced Sentence p2
7203 - Entrapment
7203 - Erroneous calculation of tax
7203 - Exclusion of Oral Testimony
7203 - Exercise Privilege-Exclusion from Courtroom
7203 - Expert Witness p1
7203 - Expert Witness p2
7203 - Expert Witness p3
7203 - Expert Witness p4
7203 - Extenuating Circumstances
7203 - Fact Finding p1
7203 - Fact Finding p2
7203 - Fact Finding p3
7203 - Fact Finding p4
7203 - Fact Finding p5
7203 - Failure of IRS to File Return
7203 - Failure to Assess Tax
7203 - Failure to Prosecute p1
7203 - Failure to Prosecute p2
7203 - Failure to Prosecute p3
7203 - Failure to Prosecute p4
7203 - Failure to Prosecute p5
7203 - Failure to Report Income 1 p1
7203 - Failure to Report Income 1 p2
7203 - Failure to Report Income 1 p3
7203 - Failure to Report Income 1 p4
7203 - Failure to Report Income 1 p5
7203 - Failure to Report Income 1 p6
7203 - Failure to Report Income 2 p1
7203 - Failure to Report Income 2 p2
7203 - Failure to Supply Information
7203 - False Return
7203 - Fictitious names
7203 - Fraud Case Procedures p1
7203 - Fraud Case Procedures p2
7203 - Fraud Case Procedures p3
7203 - Fraud Case Procedures p4
7203 - General Exception
7203 - Good Faith p1
7203 - Good Faith p2
7203 - Good Faith p3
7203 - Good Faith p4
7203 - Government Agent Prosecuting Claim
7203 - Grand Jury 1 p1
7203 - Grand Jury 1 p2
7203 - Grand Jury 1 p3
7203 - Grand Jury 1 p4
7203 - Grand Jury 1 p5
7203 - Grand Jury 2 p1
7203 - Grand Jury 2 p2
7203 - Hearsay Evidence p1
7203 - Hearsay Evidence p2
7203 - Hearsay Evidence p3
7203 - Hearsay Evidence p4
7203 - Hearsay Evidence p5
7203 - Hostility of the Court p1
7203 - Hostility of the Court p2
7203 - Hostility of the Court p3
7203 - Hypnosis
7203 - Identification
7203 - Ignorance of Law
7203 - Immunity p1
7203 - Immunity p2
7203 - Immunity p3
7203 - Impeachment p1
7203 - Impeachment p2
7203 - Improper Comment PART 1 p1
7203 - Improper Comment PART 1 p2
7203 - Improper Comment PART 1 p3
7203 - Improper Comment PART 1 p4
7203 - Improper Comment PART 1 p5
7203 - Improper Comment PART 2 p1
7203 - Improper Comment PART 2 p2
7203 - Improper Comment PART 2 p3
7203 - Improper Comment PART 2 p4
7203 - Improper Comment PART 2 p5
7203 - Improper Comment PART 3
7203 - Improper Question
7203 - Incrimination 1 p1
7203 - Incrimination 1 p2
7203 - Incrimination 1 p3
7203 - Incrimination 1 p4
7203 - Incrimination 1 p5
7203 - Incrimination 2 p1
7203 - Incrimination 2 p2
7203 - Incrimination 2 p3
7203 - Incrimination 2 p4
7203 - Incrimination 2 p5
7203 - Incriminaton Before Grand Jury p1
7203 - Incriminaton Before Grand Jury p2
7203 - Instructions to Jury 1 p1
7203 - Instructions to Jury 1 p2
7203 - Instructions to Jury 1 p3
7203 - Instructions to Jury 1 p4
7203 - Instructions to Jury 1 p5
7203 - Instructions to Jury 2 p1
7203 - Instructions to Jury 2 p2
7203 - Instructions to Jury 2 p3
7203 - Instructions to Jury 2 p4
7203 - Instructions to Jury 2 p5
7203 - Instructions to Jury 3 p1
7203 - Instructions to Jury 3 p2
7203 - Instructions to Jury 3 p3
7203 - Instructions to Jury 3 p4
7203 - Instructions to Jury 3 p5
7203 - Instructions to Jury 4 p1
7203 - Instructions to Jury 4 p2
7203 - Instructions to Jury 4 p3
7203 - Instructions to Jury 4 p4
7203 - Instructions to Jury 4 p5
7203 - Instructions to Jury 5 p1
7203 - Instructions to Jury 5 p2
7203 - Instructions to Jury 5 p3
7203 - Instructions to Jury 5 p4
7203 - Instructions to Jury 5 p5
7203 - Instructions to Jury 6 p1
7203 - Instructions to Jury 6 p2
7203 - Instructions to Jury 6 p3
7203 - Instructions to Jury 6 p4
7203 - Instructions to Jury 6 p5
7203 - Instructions to Jury 7 p1
7203 - Instructions to Jury 7 p2
7203 - Instructions to Jury 7 p3
7203 - Instructions to Jury 7 p4
7203 - Instructions to Jury 7 p5
7205 Convictions p1
7205 Convictions p2
7205 Convictions p3
7205 Convictions p4
7205 Convictions p5
7205 Double Jeopardy
7205 Exemption Certificates
7205 Hostility of the Court
7205 Indictment
7205 Information
7205 Intent to Deceive Lacking
7205 Right to Counsel
7205 Trial, Timeliness
7205 Variance
7205 Venue
7205 Willfulness
7206 False Returns 1 p1
7206 False Returns 1 p2
7206 False Returns 1 p3
7206 False Returns 1 p4
7206 False Returns 1 p5
7206 False Returns 2 p1
7206 False Returns 2 p2
7206 False Returns 2 p3
7206 False Returns 2 p4
7206 False Returns 2 p5
7206 False Returns 3 p1
7206 False Returns 3 p2
7206 False Returns 3 p3
7206 False Returns 3 p4
7206 Basis for Allegation of Fraud
7206 Concealment of Assets p1
7206 Concealment of Assets p2
7206 Conspiracy 1 p1
7206 Conspiracy 1 p2
7206 Conspiracy 1 p3
7206 Conspiracy 1 p4
7206 Conspiracy 2 p1
7206 Conspiracy 2 p2
7206 Constitutionality p1
7206 Constitutionality p2
7206 Constitutionality p3
7206 Costs
7206 Disclosure of Returns
7206 Estoppel p1
7206 Estoppel p2
7206 Estoppel p3
7206 Evidence 1 p1
7206 Evidence 1 p2
7206 Evidence 1 p3
7206 Evidence 1 p4
7206 Evidence 1 p5
7206 Evidence 2 p1
7206 Evidence 2 p2
7206 Evidence 2 p3
7206 Evidence 2 p4
7206 Evidence 2 p5
7206 Evidence 3 p1
7206 Evidence 3 p2
7206 Evidence 3 p3
7206 Evidence 3 p4
7206 Evidence 3 p5
7206 Evidence 4 p1
7206 Evidence 4 p2
7206 Evidence 4 p3
7206 False Claims Against U.S.
7206 False Documents p1
7206 False Documents p2
7206 False Statements in Return 1 p1
7206 False Statements in Return 1 p2
7206 False Statements in Return 1 p3
7206 False Statements in Return 1 p4
7206 False Statements in Return 1 p5
7206 False Statements in Return 2 p1
7206 False Statements in Return 2 p2
7206 False Statements in Return 2 p3
7206 False Statements in Return 2 p4
7206 False Statements in Return 3 p1
7206 False Statements in Return 3 p2
7206 False Statements in Return 3 p3
7206 False Statements in Return 3 p4
7206 False Statements in Return 3 p5
7206 False Statements in Return 4 p1
7206 False Statements in Return 4 p2
7206 False Statements in Return 4 p3
7206 False Statements in Return 4 p4
7206 False Statements in Return 4 p5
7206 False Statements in Return 5 p1
7206 False Statements in Return 5 p2
7206 False Statements in Return 5 p3
7206 False Statements in Return 5 p4
7206 False Statements to IRS Agents p1
7206 False Statements to IRS Agents p2
7206 False Statements to IRS Agents p3
7206 Forgery
7206 Grand Jury
7206 Guilty Plea p1
7206 Guilty Plea p2
7206 Immunity
7206 Indictment 1 p1
7206 Indictment 1 p2
7206 Indictment 1 p3
7206 Indictment 1 p4
7206 Indictment 1 p5
7206 Indictment 2 p1
7206 Indictment 2 p2
7206 Instructions to Jury 1 p1
7206 Instructions to Jury 1 p2
7206 Instructions to Jury 1 p3
7206 Instructions to Jury 1 p4
7206 Instructions to Jury 1 p5
7206 Instructions to Jury 2 p1
7206 Instructions to Jury 2 p2
7206 Instructions to Jury 2 p3
7206 Instructions to Jury 2 p4
7206 Instructions to Jury 2 p5
7206 Instructions to Jury 3 p1
7206 Instructions to Jury 3 p2
7206 Instructions to Jury 3 p3
7206 Instructions to Jury 3 p4
7206 Instructions to Jury 3 p5
7206 Jury Verdict Disregarded
7206 Jury p1
7206 Jury p2
7206 Jury p3
7206 Lesser Included Offense p1
7206 Lesser Included Offense p2
7206 Motion For Continuance
7206 Motion to Sever
7206 Motion to Transfer
7206 Motion to Vacate Sentence
7206 Net Worth Statement
7206 Offer in Compromise
7206 Perjury
7206 False or Fraudulent Returns p1
7206 False or Fraudulent Returns p2
7206 False or Fraudulent Returns p3
7206 False or Fraudulent Returns p4
7206 False or Fraudulent Returns p5
7206 Prior Convictions
7206 Prior Law
7206 Probation
7206 Prosecutor's Comment p1
7206 Prosecutor's Comment p2
7206 Restitution
7206 Right to Counsel p1
7206 Right to Counsel p2
7206 Sentence p1
7206 Sentence p2
7206 Sentence p3
7206 Sentence p4
7206 Sentencing Guidelines 1 p1
7206 Sentencing Guidelines 1 p2
7206 Sentencing Guidelines 1 p3
7206 Sentencing Guidelines 1 p4
7206 Sentencing Guidelines 1 p5
7206 Sentencing Guidelines 2 p1
7206 Sentencing Guidelines 2 p2
7206 Sentencing Guidelines 2 p3
7206 Statute of Limitations p1
7206 Statute of Limitations p2
7206 Venue
7206 Willfulness Defined p1
7206 Willfulness Defined p2
7206 Willfulness Defined p3
7206 Willfulness Defined p4
7207 Conviction
7207 Defenses
7207 Motion to Dismiss
7207 Sentencing
7207 Willfully Defined
7210 Willful Failure to Obey Summons
7212 Assault
7212 Bribery
7212 Constiutionality
7212 Indictment
7212 Interference p1
7212 Interference p2
7212 Interference p3
7212 Interference p4
7212 Jury Instructions
7212 Rescue of Seized, Levied Property p1
7212 Rescue of Seized, Levied Property p2
7212 Sentence p1
7212 Sentence p2
7212 Statute of Limitations
7212 Suppresion of Evidence
7215 Constitutionality
7215 Conviction
7215 Corporation
7215 Defenses
7215 Evidence
7215 Intent
7215 Speedy Trial
7216 Consent
7216 Preparer Defined
7216 Scope of Statute
7217 IRS Employees

 

Bank Records and Net Worth Increases 3 Page4

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The Government proceeded first by accepting the defendant's net worth statement as of January 1, 1941 and then stating the defendant's net worth as of the end of each calendar year through 1948. The defendant's assets and liabilities as disclosed in these annual opening and closing statements came from the records of the defendant's real estate agents, his stock brokers and his bank; the source records of these amounts were reliable and stated the property he then owned and his indebtedness. There were, however, no records to establish the amount of cash on hand listed among the assets, save only as appeared in the defendant's statements of his net worth as of January 1, 1941 and December 31, 1948. The Government, following recognized practice, calculated the difference between the net assets of the defendant at the beginning and end of each calendar year from 1941 through 1948. In this manner, it showed the gradual annual increase in net worth for each year and accounted for the total increase admitted by the defendant to be $81,956.76 (with the adjustment for capital improvements). 13 These annual net worth increases accrued almost entirely during 1943 through 1948 and were found in the increase in the equity in defendant's realty holdings resulting from amortization and payment of mortgage liens and in defendant's brokerage accounts because of cash payments made by him into those accounts.

To these annual net worth increases, the Government then, again following accepted procedure, added the defendant's non-deductible expenditures (being admitted personal living expenses) and in 1948, $7,500. for a loan repaid and $6,080. for a remittance to Italy . 14 Continuing, then, the Government credited the defendant with accounting for the amount of income reported in his returns, the amount claimed in his returns for depreciation on realty, and the non-taxable portion of capital gains. 15

It was the difference between this resultant figure of income accounted for by the defendant and the sum of his net worth increases and other non-deductible expenditures, which the Government sought to illustrate by the schedule Ex. 67 as the amount which the defendant failed to report and this was stated as follows:

Net Worth                                                        Less Total
Increase and nondeductible                                 Income Accounted          Difference being
expenditures                                               for by defendant         income unreported
1941 ..........................         $ 3,457.57               $ 1,897.33                $ 1,560.24
1942 ..........................           2,203.09                   688.14                  1,514.95
1943 ..........................           2,386.18                   844.60                    879.08
1944 ..........................           9,198.99                 3,403.51                    520.48
1945 ..........................          17,116.70                 3,808.39                  7,508.97
1946 ..........................          32,368.71                14,415.13                 17,953.58
1947 ..........................          21,570.42                12,592.33                  8,978.09
1948 ..........................          30,048.00                22,842.99                  7,205.11


We accept these calculations as far as they go; they are sufficiently supported by data and admissions of the defendant; they do not, however, present the complete picture.

The evidence showed that prior to trial the defendant's accountant had satisfied the examining agents that in the years 1946, 1947 and 1948 the defendant had made errors in under-reporting his income from his realty holdings--to the extent of $5,222.68 in 1946, $5,788.22 in 1947 and $11,144.15 in 1948. These amounts, the Government conceded on trial to have been erroneously not fraudulently unreported by the defendant. By crediting these amounts, the income fraudulently not reported as claimed by the Government and demonstrated by its schedule Ex. 67, was reduced in 1946 from $17,953.58 to $12,730.90, in 1947 from $8,978.09 to $3,189.87 and in 1948 from $7,205.11 to an over-declaration of income (when viewed from the standpoint of fraud) of $3,909.04. It was the failure of the Government to include these adjustments for these years which made Ex. 69 necessary. Exhibit 67 did not present the figures as they were known to the prosecution; it was erroneous in that it did not take into account these realty income adjustments. Exhibit 67 was confusing unless read with and interpreted by the computations shown in Ex. 69.

[Failure of Adjust]

It is urged by the defendant on this appeal that the Government's failure to make adjustments with respect to defendant's realty income for these three years fundamentally and adversely to him affected the validity of its calculations, resulting (a) in an entirely fictitious and inadequate opening item of cash of $100. as of December 31, 19 46 and (b) in an erroneous overstatement of at least $5,222.68 in the Government's claimed "Increase in New [Net] Worth for 1947," and (c) in the erroneous creation of the item of alleged fraud in 1947 in the amount of $3,189.87.

To determine the merits of the first contention the evidence presented concerning cash payments by the defendant during the years 1941 through 1946 must be separately considered. Records of the defendant's realty purchases showed that he had expended $9,095. in acquiring title to an apartment building in 1943, $3,750. in 1944 and $25,000. in 1945 for a like purpose, making his total cash expenditures for realty in these years $37,845. Records of the defendant's brokerage accounts showed that he made cash deposits in these accounts of $2,882. in 1944, $8,172.26 in 1945 and $24,202.11 in 1946--a total of $35,256.37. The grand total of cash disbursements for realty and securities was $73,101.37 for these years. There was no proof of cash expenditures in 1941 and 1942; the evidence showed that the cash fund of the defendant, which he admitted having on January 1, 19 41, had been entirely disbursed prior to the prosecution year, 1947. In fact, the Government proved that after full allowance for the cash on hand on January 1, 19 41, the defendant had expended an amount of income considerably greater than that which he had accounted for in his returns or otherwise prior to 1947.

Some observations should be made as to the extent that the reality income adjustments for 1946, 1947 and 1948 (or for any other year) would affect the net worth calculations.

The income for any year did not directly enter into the calculations of defendant's assets and liabilities for either the beginning or the end of the calendar year periods. The assets were the sum total of cash on hand, the bank balances, the cost of realty and the cost of securities; the liabilities were the mortgages on realty, and the indebtedness to realty agents and stock-brokers--the difference was the defendant's net worth. There was no direct evidence that the defendant possessed any greater amount of cash on December 31, 1946 or on December 31, 1947 than he stated he did on December 31, 1948, that is $100. Assuming, however, that he did have the $5,222.68 realty adjusted income of 1946 on hand and unexpended as cash on December 31, 1946, it would effect an increase in net worth for the year 1946 from $118,581.34 to $123,804.02 since the defendant's assets as of December 31, 1946 would be increased from $541,499.75 to $546,722.43 occasioned by the increase of cash on hand from $100. to $5,322.68. Assuming, also, that he had the $5,788.22 realty adjusted income of 1947 on hand and unexpended as cash on December 31, 1947 it would effect an increase in net worth during 1947 (taking into account the assumed increase in cash of 1946) from $136,901.76 to $147,912.66. This would operate to reveal an increase in net worth for the calendar year 1947 of $24,108.64 instead of $18,320.42, as claimed by the prosecution, and would not benefit the defendant. An even larger increase in net worth in 1948 would result, if we assume that the additional realty income of $11,144.15 in 1948 was retained as cash and unexpended as in 1946 and 1947. Such assumptions would simply demonstrate that the defendant had misstated the amount of cash on hand on December 31, 1948, and that he in fact had at that time a cash hoard not revealed of $22,255.05 instead of the $100. From these assumptions it would also follow that the defendant's income for 1946, 1947 and 1948 was larger than that contended for by the prosecution. In absence of proof to the contrary we have assumed that the amounts of additional realty income were expended; this we have done by accepting the defendant's own statement of net worth as of December 31, 1948 wherein he stated his amount of cash on hand to be $100., this being the interpretation most favorable to him. The very plausible explanation advanced by the Government on this appeal is that the defendant had understated his living expenses as $2,750. for 1946, $3,250. for 1947 and $3,741. for 1948. The items of adjusted realty income for 1946, 1947 and 1948 do not affect the basic integrity of the Government's net worth calculations, under this view, except to reduce the amount of fraudulently unreported income as we have above noted.

[Prejudicial Error]

Nevertheless, the omission of these items, of which the Government had notice prior to trial, from Ex. 67 entitled "Analysis of net worth increase and computation of unreported income" served to make that exhibit incomplete, inaccurate and misleading and the failure of the trial judge to sustain objection to its admission in evidence operated to the prejudice of the defendant. It was not an analysis of the net worth increase or a computation of fraudulently unreported income which conformed to the Government's evidence, and it did not fully state the facts. This is especially so because the omission of these items in effect forced a balance between the Government's calculations and the defendant's statement of his net worth as of December 31, 19 48. The Government contended that its calculations were corroborated by this statement, but there was no agreement with the amount stated to be cash on hand if these items of adjusted realty income remained unexpended and they were not revealed or accounted for by schedule Ex. 67.

It is also contended by the defendant that the Government knew or should have known that adjustments were necessary with respect to the realty income of 1943, 1944 and 1945 and that it failed to make these thus affecting the validity of its net worth calculations. The very short answer to this is that the evidence, including the realty agents' reports, did not reveal any facts which would necessitate or support an adjustment of defendant's realty income for these years.

We recognize that in a net worth computation "the cogency of its proof depends upon its effective negation of reasonable explanations by the taxpayer inconsistent with guilt." Holland v. United States , p. 135. This in turn places the burden on the Government to "track down relevant leads furnished by the taxpayer--leads reasonably susceptible of being checked, which, if true, would establish the taxpayer's innocence." (pp. 135-136).

In the computation of the defendant's income for the years 1943, 1944 and 1945 no adjustment was made for unreported realty income. However, even were such adjustments found to have been necessary and were they made, they would not have affected the defendant's unassuming the amounts involved not to have been expended, reported income for 1947 and would have operated only to increase by an equal amount the cash the defendant had on hand at the beginning and end of 1947. The realty agents testified on the trial and the defendant neither inquired nor pointed out the necessity or occasion for adjustment of reported realty income for these years--1943, 1944 and 1945. It was not incumbent on the Government to minutely examine each and every one of the statements of the firms managing the real estate to determine what expenses were charged to maintenance, when in fact they were capital expenditures, or whether the defendant accurately carried over from these statements to his returns the multitude of other expenditures made by his agents in operating his property during the years 1943, 1944 and 1945. The particulars as to those items lay with the defendant and his agents; the defendant voluntarily disclosed them as to 1946, 1947 and 1948 and this resulted in the adjustments discussed. It is but fair to assume that by his silence as to them they would disclose nothing to his benefit; in any event, the realty agents' statements in evidence do not disclose information which would enable one to determine whether the expenses incurred were deductible. Prima facie, it was sufficient for the Government to establish, as it did, the net amount the defendant received from his real estate agents after they had deducted the operating costs. We find no substance in the point made that the Government was obligated to negative any real estate income adjustments which were entirely speculative and which, in any event, would not have affected the 1947 income.

The charge of the Court gave the jury but little guidance as to the interpretation to be placed on the schedules which were introduced in evidence by the Government. It explained none of the calculations shown. The Court emphasized Ex. 67 without calling attention to Ex. 69 or mentioning that the items of adjusted realty income for 1946, 1947 and 1948 were omitted from Ex. 67 or that these items should be credited to the defendant in the computation of unreported income alleged by the Government to have been fraudulently unreported for these three years. The charge did not meet the requirements of a net worth prosecution.

[Jury Instructions]

The defendant contends that he was prejudiced by the refusal of the Court to charge that "whether or not the jury finds or believes that the defendant was guilty with respect to the years prior to 1947, if it finds or believes that with respect to 1947 he did not wilfully understate his income he should be acquitted." We do not agree; the charge was adequate on this matter.

However, the charge insofar as it concerned the weight which might be given to the defendant's 1948 return on the issue of wilfulness with respect to the 1947 return was misleading and erroneous. In the 1948 return, as we have pointed out, the defendant under-reported his income but this, as conceded by the Government, was not pursuant to a purpose or intent to evade payment of income tax for 1948. In fact, as we have noted, from the standpoint of fraud this constituted an overstatement of income to the extent of $3,939.04. In its charge the Court first instructed the jury:

"The jury may consider likewise on the issue of wilfulness the correctness or incorrectness of the returns filed by the defendant from 1941 to 1944, 1945, 1946, 1947 and 1948. In this connection, however, you will firmly bear in mind that the defendant is not charged with having violated the income tax law any year other than the year 1947."

At the conclusion of the charge the defendant's counsel took exception (out of the hearing of the jury) as follows:

"Mr. Lorenz: Well, I except to the charge that anything with respect to 1948 may be considered in connection with intent in prior years."

After some extended colloquy the court stated to the jury:

"The Court: I made the following statement, members of the jury, which I think bears correction: I said the jury may consider on the issue of wilfulness the correctness or incorrectness of the return filed by the defendant for 1941 to 1944, 1945, 1946 and 1948. Now you may strike that from your minds as a definite correction and not consider that, but I will substitute for that the following:

"The jury may also consider on the issue of wilfulness, if it finds it to be a fact, that the returns filed by the defendant from 1941 to 1944, were false and fraudulent - - -

"Mr. Hill: Excuse me, your Honor, I don't mean to interrupt your Honor, but I think it is 1946.

"The Court: What do you say?

"Mr. Hill: I say I don't mean to interrupt your Honor, but I think it is 1941 to 1946.

"The Court: Well, not the way this reads.

"Mr. Hill: No, your Honor. That was written before your Honor's ruling with respect to the other thing.

"The Court: To 1946. That is correct. Further, the jury may consider on this same issue, if it finds it to be a fact, if it finds it to be so, that the 1948 return was false and fraudulent.

"And that will complete my instructions to you."

In view of the exceptions taken by the defendant to the charge as originally given it was prejudicial to the defendant to ask the jury to consider on the issue of wilful evasion in 1947 whether the 1948 return was false and fraudulent when the Government had conceded on the trial that it was not.

We feel, too, that it was prejudicial to the defendant to have denied the request to charge "what the amount of fraudulently claimed income is in 1947." We feel that errors which might otherwise have been disregarded as not affecting the substantial rights of the defendant, here, because of the nature of the prosecution's proof and the exhibits may not be overlooked.

The judgment is Reversed and new trial ordered.

1 Count 1 of the indictment charged that on March 15, 19 46 defendant attempted to evade income tax for the calendar year 1945, and alleged that the defendant made a false and fraudulent income tax return for that year wherein he stated that his net income was $3,808.39 and the tax due thereon $677.11 when he well knew that his net income for that year in fact was $11,317.86 on which there was due income tax of $2,408.22.

Count 2 of the indictment charged that on March 15, 19 47 the defendant attempted to evade income tax for the calendar year 1946, and alleged that the defendant made a false and fraudulent tax return for that year wherein he stated that his net income for the year was $4,391 and the amount of tax due thereon $670.71, when he well knew that his net income for the year in fact was $20,217.01 on which there was due income tax of $5,830.79.

Count 3 of the indictment charged that on March 15, 19 48 the defendant attempted to evade income tax for the calendar year 1947, and that the defendant made a false and fraudulent tax return for that year wherein he stated that his net income for the year was $4,293.33 and the amount of tax due thereon $650.24, when he well knew that his net income for the year in fact was $14,118.70 on which there was due income tax of $3,036.75.

2 The trial judge at first denied a motion for a directed verdict of acquittal but under Rule 29 reserved the right to reconsider. He later granted the motion for a directed verdict. Since the Government has filed no appeal, the procedure adopted is of no import. We have before us only the conviction on Count 3.

3 The defendant objected to the admission in evidence of many of these statements, contending that they were given under a promise that there would be no criminal prosecution. The trial was interrupted and a separate hearing held on these objections out of the presence of the jury. The objections were overruled. On this appeal, this ruling has not been questioned by the defendant. We accept these statements as having been voluntarily made.

11 The Assistant United States Attorney stated: "The 1948 net worth statement is the document which the Government will use to corroborate its build up of the taxpayer's net worth from 1941 forward. All we want to do is work backward from the end of 1948 to the end of 1947 to prove that the figure we arrive at, at the end of 1947, is correct. That is all." (S. M. 205.)

12 Thus, concerning Ex. 73 which is described as a reconciliation of net worth increases, the following colloquy took place on trial:

"The Court: Well, let us be sensible. Is it a mass of figures?

"Mr. Hill (Ass't U. S. Attorney): Yes, Your Honor, it is a mass of figures."

Examination of the exhibit shows this description to be entirely fitting. Exactly why such a reconciliation was at all necessary is difficult to understand. If the schedule of net worth increases (Ex. 67) had been correctly prepared in the first instance, there would have been no need for the reconciliation (Ex. 73). It was the admitted error in Ex. 67 which was "reconciled."

[55-1 USTC ¶9366]C. A. Dupree, Appellant v. United States of America , Appellee

(CA-5), In the United States Court of Appeals for the Fifth Circuit, No. 14659, 220 F2d 748, April 15, 19 55

Appeal from the United States District Court for the Western District of Texas.

[1939 Code Sec. 145(b)--similar to 1954 Code Sec. 7201]

Criminal prosecution for fraud: Proof under net worth method: Rehearing.--On the Government's motion for rehearing on taxpayer's acquittal on charges of criminal prosecution for fraud, it was held that neither the adequacy of proof as to the starting available funds under the net worth method nor the clarity of the trial court's charge to the jury met the standard implicit in the pronouncement of the Supreme Court. Rehearing denied.

John D. Cofer and G. Hume Cofer, 905-9 Littlefield Bldg., Austin , Texas , for appellant. C. F. Herring, United States Attorney, and Bradford F. Miller, Assistant United States Attorney, Post Office Box 1701, San Antonio 6, Texas, for appellee.

Before HOLMES and TUTTLE, Circuit Judges, and ALLRED, District Judge.

On Petition for Rehearing

PER CURIAM:

We have carefully considered the motion for rehearing filed by the United States . In the light of the teaching of Holland v. United States, 1 which was not available to the Government when presenting this case or to the trial court [55-1 USTC ¶9169] when considering the difficult issues involved, "appellate courts should review the cases [of this general type] bearing constantly in mind the difficulties that arise when circumstantial evidence as to guilt is the chief weapon of a method that is itself only an approximation." We are also told that "the complexity of the problem is such that it cannot be met merely by the application of general rules," and that "charges should be especially clear, including, in addition to the formal instructions, a summary of the nature of the net worth method, the assumptions on which it rests, and the inferences available both for and against the accused."

We do not believe this case either in the adequacy of proof as to the starting available funds in January, 1946, or in the clarity of the charge, meets the standards implicit in this pronouncement of the Supreme Court.

The motion for rehearing is, therefore, DENIED.

1 348 U. S. 121, 129 [54-2 USTC ¶9714].

 

 

[56-1 USTC ¶9473]Fred M. Ford, Appellant v. United States of America , Appellee

(CA-5), In the United States Court of Appeals for the Fifth Circuit, No. 15672, 233 F2d 56, April 19, 19 56

Appeal from the United States District Court for the Western District of Texas.

[1939 Code Sec. 145(b)--substantially unchanged in 1954 Code Sec. 7201]

Criminal prosecution: Fraud: Appeal from jury verdict: Second trial.--Taxpayer, a former chief of police, appealed from a conviction and sentence following a second trial for filing fraudulent returns for 1945-1947. In affirming the trial court's judgment, the appellate court held that there was sufficient evidence of tax evasion to support the trial court's denial of taxpayer's motion for acquittal, the Government being required in criminal prosecutions to prove no more than that the taxpayer failed to compute his income tax honestly. The trial court did not err in admitting testimony about alleged "pay-offs" through third parties to the taxpayer, testimony about expenditures made by the taxpayer's wife, and testimony about unsworn statements made by taxpayer to Government agents. The trial court did not err in refusing to permit cross-examination of the local mayor as to his views on prostitution and in refusing to permit interrogation of the jury regarding a newspaper article about the mayor's views. The indictment upon which taxpayer was convicted was not void because the only witness who appeared before the Grand Jury was a Government agent with no personal knowledge of the facts or because that witness did not compute before the Grand Jury the amount of taxes, if any, due by taxpayer.

Douglas W. McGregor, Houston , Tex. , for appellant. Harman Parrott, Assistant United States Attorney, San Antonio, Tex., Fred B. Ugast, Tax Division, Department of Justice, Washington, D. C., for appellee.

Before BORAH, TUTTLE and JONES, Circuit Judges.

JONES, Circuit Judge:

An indictment in three counts charged that appellant had wilfully and knowingly attempted to evade and defeat a large part of the income tax due and owing by him and his wife for the years 1945, 1946 and 1947 by filing false and fraudulent returns on behalf of himself and his wife wherein he reported income for a less sum than the true amount, and in which he stated the tax for smaller amounts than he knew to be owing. The counts were in substantially the same form. A separate count set forth the amounts of income and tax for each of three years. The indictment alleged violations of the portion of the Internal Revenue Code of 1939 which provided that:

"* * * any person who wilfully attempts in any manner to evade or defeat any tax imposed by this chapter or the payment thereof, shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, be fined not more than $10,000, or imprisoned for not more than five years, or both, together with costs of prosecution." Internal Revenue Code of 1939, former 26 U. S. C. A. §145(b); Internal Revenue Code of 1954, 26 U. S. C. A. §7201.

This is an appeal from a conviction and sentence following a second trial of this case held at Austin , Texas . This Court reversed a conviction obtained at the first trial. Ford v. United States , 5th Cir. 1954, 210 Fed. (2d) 313 [54-1 USTC ¶9233]. At the second trial, as at the first, the Government relied upon the cash receipts and expenditures method, sometimes called the net worth method, of establishing unreported income. In the first appeal, as in the present appeal, the appellant contended that the District Court should have granted a motion for acquittal because of the insufficiency of the evidence. After relating in some detail the evidence adduced at the former trial it was held by this Court that the motion for acquittal was properly denied. The evidence in the record now before us presents proofs no less convincing, and without setting forth the evidentiary facts, we hold, as we held before, that the motion for acquittal was properly denied.

[Motion for Acquittal]

The appellant contends that error was committed in denying his motion for acquittal because there had been no determination of his tax liability by the Commissioner under §272 or §3612 of the Internal Revenue Code of 1939. §272 of the Internal Revenue Code of 1939, former 26 U. S. C. A., provides for the procedure in determining the correctness of a tax deficiency proposed by the Commissioner of Internal Revenue, including the issuance of the familiar ninety-day letter. §3612 authorizes the Collector to make a return where no return or a false or fraudulent return has been filed, and requires that the Commissioner [of Internal Revenue] shall determine and assess all taxes, other than stamp taxes, as to which returns are made pursuant to the section. Whatever bearing the appellant's contention might have in a proceeding for the collection of a tax, it has no application in a criminal prosecution for attempting to evade and defeat a tax by filing false and fraudulent returns. As this Court has heretofore said:

"A prosecution for income tax evasion is not an effort by the Government to compute income tax at all. It is an effort by the Government to prove that the taxpayer failed to compute it honestly. There is nothing in this Section [Former 26 U. S. C. A. §41] nor in any other applicable statute that restricts the Government in the method of proving this fact if it exists." Dupree v. United States , 5th Cir. 1955, 218 Fed. (2d) 781 [55-1 USTC ¶9169].

[Pay-Off]

At the first trial of this case, Margaret Lera testified as a witness for the Government. She testified as a witness for the Government at the second trial. On the first trial this witness testified to the making of pay-offs to the police department of Galveston . There was no testimony in the first trial that the appellant received any of the moneys. We held, on the former appeal, that the admission of the testimony of this witness was erroneous and highly prejudicial. For this error, and another which we need not here mention, a new trial was granted. At the second trial the witness testified that she sent pay-off money to the appellant during the years 1945, 1946 and 1947 by detectives. Being interrogated about conversations between the appellant and herself during these years, she stated that she had asked appellant if the detectives had been delivering what she had been sending, and quoted his reply as being "Yes, that everything was all right". This, we think, was enough to meet to objection which was found to be error on the former appeal. It was shown that Mrs. Lera had made a settlement after the first conviction of the appellant of her own income tax liability. On cross-examination she told of being interviewed by Government agents about a month before the trial, being furnished with a transcript of the questions and answers comprising the interview, and of burning the transcript of the testimony during the noon recess of the day she testified. The owing and settlement of income taxes, the discussion with Government agents regarding some matter, possibly the Ford case, and the destruction of the transcript of the interview are not matters which would exclude Mrs. Lera's testimony.

The District Court admitted testimony as to expenditures made by appellant's wife and error is assigned because such testimony was received. There was evidence that such funds as Mrs. Ford had and spent were received from the appellant. The court declined to give a charge to the jury, requested by appellant, that it should give no consideration to purchases of Mrs. Ford in determining the taxable income of the appellant. We need not discuss these questions as they are disposed of in the former appeal. Ford v. United States, supra. See Lloyd v. United States , 5th Cir. 1955, 226 Fed. (2d) 9 [55-2 USTC ¶9665].

Relying chiefly upon Calderon v. United States, 9th Cir. 1953, 207 Fed. 2d 377, the appellant urges that the unsworn statements made by appellant to Government agents were inadmissible because, he says, the corpus delicti had not been established. The agents testified that appellant had said, in response to questions, that he kept cash in a chifforobe drawer in the amount of two or three thousand dollars in 1945 and 1947. Again he said, that in 1944, prior to the tax years involved, he had $12,00