Thank You For Submiting Feedback!
In any tax evasion indirect method case, the government must prove that the increased wealth did not come from non-taxable sources. Otherwise the evidence will be insufficient, for there is always the possibility that the taxpayer deposited cash that he received from a non-taxable source or from income taxed in a prior year but kept on hand as cash or even from unreported income from a prior year kept on hand in cash. Such events are common human occurrences, and this possibility may of itself create reasonable doubt. Therefore, the government must establish in some fashion the amount of cash the taxpayer had on hand at the start of the period. This is part of the government's duty to negate the possibility that bank deposits or cash expenditures in the year under investigation originated from non-taxable sources. On the other hand, where the government's case is based on evidence showing specific items of unreported income, the safeguards required for indirect methods of proof are not necessary, as the possibility that the defendant may be convicted because non-taxable income is mistakenly presumed to be taxable income, or because cash expenditures are mistakenly assumed to be made from taxable income, is not present.
Appellant, Fred Black, was indicted and prosecuted on numerous counts including a RICO Act violation, one count of conspiracy, seven counts of concealment of material facts, seven counts of causing a failure to file currency transaction reports, five counts of Travel Act violations, mail and wire fraud counts, and four counts of tax evasion. The Government charged that although Black received $ 65,827 of taxable income in 1978, $ 109,251 of taxable income in 1979, and $ 174,755 of taxable income in 1981, he failed to file a return for any of those years. The Government contended that it employed the "specific items" method of proof, a direct method of demonstrating tax evasion in which the Government “produced evidence of the receipt of specific items of reportable income by the defendant that did not appear on his income tax return.” After a forty-day trial, Black was convicted on three counts of tax evasion. Black challenged his conviction, complaining of insufficiency of the Government's evidence, of error in the trial court's charge to the jury, and of improper anti-deadlock instructions.
Under the circumstances, did the trial court err in its decision to convict appellant of three counts of tax evasion?
On review, the court affirmed, finding that the government established that appellant received substantial taxable income that he did not report, using the specific items of proof method. The court noted that if the statements by the prosecutor, the testimony of the government's tax witness, and the trial court's instructions to the jury were each considered in light of the evidence actually submitted, it was clear that the government presented direct proof that appellant received specific items of taxable income and did not pay tax on that income. Based on the strength of the government's evidence, the uncontested personal nature of the expenditures, and the incredibility of appellant’s claim that he considered the transactions to be loans, any shortcomings in the instructions did not rise to the level of plain error. The anti-deadlock charge to the jury was not actually given more than once and was given after the trial court's inquiry whether the jury was irrevocably deadlocked on all counts. The cumulative effect of the instructions was not coercive or prejudicial.