Tax Conviction and Sentence Affirmed Under Unusual Circumstances

Tax Conviction and Sentence Affirmed Under Unusual Circumstances

In United States v. Moore, 2012 U.S. App. LEXIS 24621 (4th Cir. 11/28/12) (unpublished), here, the defendant raised many arguments, but I address only two here.

1.  Error in Computing Tax Due at Trial then Conceded at Sentencing

The prosecutors used the modified bank-deposits method of proof but failed to take into account some expenditures in prosecuting the defendant for tax perjury (Section 7206(1)).  By sentencing, the Government realized the mistake and reduced the tax loss for sentencing by the amounts erroneously not considered before.  The defendant argued that the reduction was newly discovered evidence entitling him to a new trial under Rule 33, FRCrP, here.   The Court rejected the argument on the basis that the defendant had not shown that the new evidence would have affected the verdict.  Here are the key excerpts of the opinion:

Moore also seeks a new trial based on newly discovered evidence. He argues that, at trial, the government's bank- deposits analysis overstated his taxable income for 2005 through 2007 by $191,236 because he had paid that amount in local and state taxes but did not deduct that amount from gross receipts. By the time of sentencing the government agreed that Moore should be credited with these payments, but at trial it had admitted only that the number should be decreased by about $92,000. Moore argues that Agent Rager's eventual concession at sentencing that the original calculation of Moore's unpaid tax liability was incorrect constituted newly discovered evidence, entitling him to a new trial. We disagree that this development merited a new trial.

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Moore's argument is mostly, but not entirely, foreclosed by Delfino. There, however, the defendants did not file any tax returns, whereas Moore filed tax returns for 2005 and 2006, and for most purposes the government treated Moore as if he had also filed a tax return for 2007. We decline to determine whether this distinction renders Delfino distinguishable, because Moore's claim fails for another reason: he has not presented any evidence demonstrating the timing or amount of the expenditures purportedly giving rise to unclaimed deductions. In other words, Moore failed to prove he was entitled to a deduction (albeit unclaimed) for business expenses based on cash expenditures to dancers and other employees.

Fifth and finally, Moore argues that the government failed to reduce the alleged unreported income by the $359,000 in deposits he made from his personal account to the L.A. Diner account. This argument fails for the reasons discussed above.

The district court thus did not err in finding a tax loss greater than $400,000.

I previously blogged on the Delfino case referred to by the Court at Sentencing Tax Loss, Unfiled Returns and Deductions (Federal Tax Crimes Blog 9/15/10), here.

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View Jack Townsend's opinion in its entirety on the Federal Tax Crimes blog site.

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