United States v. Shortt Accountancy Corp. - 785 F.2d 1448 (9th Cir. 1986)

Rule:

A tax return preparer can properly be charged under 26 U.S.C.S. § 7206(1) for willfully making and subscribing a false return.

Facts:

Defendant Shortt Accountancy Corporation (SAC) prepared tax returns for taxpayers whom it had induced to claim deductions for options straddles to which they were not entitled. One of these taxpayers was an IRS informant. Consequently, the grand jury issued a fourteen count indictment charging defendant with violations of 18 U.S.C. § 371, conspiracy to commit an offense against or to defraud the United States, and 26 U.S.C. §§ 7206(1), false declaration under penalty of perjury, and aiding preparation or presentation of false documents, under the internal revenue laws. Defendant filed a motion for an evidentiary hearing on its motion to dismiss the counts relating to the IRS informant’s return. According to the defendant, the IRS informant never intended the document prepared by defendant to represent the informant’s true federal income tax return. The district court convicted defendant of seven counts of making and subscribing false tax returns in violation of 26 U.S.C.S. § 7206(1). Defendant claimed error in the district court's refusal to hold an evidentiary hearing on its pretrial defensive motions and claimed it could not be criminally liable for making a false return.

Issue:

1. Did the district court err in refusing to hold an evidentiary hearing on defendant’s pretrial defensive motions?
2. Could a corporation be held criminally liable for making a false return, notwithstanding the fact that the person who subscribed the false return believed the same to be true and correct?

Answer:

1) No. 2) Yes.

Conclusion:

In affirming defendant's convictions, the court held that the district court properly deferred evidentiary hearings on defendant's pretrial motion pursuant to Fed. R. Crim. Evid. 12(e), because the motion presented a non-segregable question of fact and law relating to the informant's intent and whether intent was an element of making a return for the purpose of 26 U.S.C.S. § 7206(1). Despite the fact that the informant had previously arranged to have the IRS waive any penalties and interest on the wrongfully claimed deduction, he filed but one return for the tax year, and thus he had an intent to make a true return. Anent the second issue, the court held that a return preparer could "make" a return for the purpose of § 7206(1), and the fact that defendant's agent who actually prepared the returns had no knowledge of their falsity did not bar the charges against defendant.