I. Forgotten-Deduction Defense
In a tax evasion case, the government bears the burden of proving that the defendant had a substantial tax deficiency. Defendants often try to show that there was no deficiency, that their return was substantially accurate, or at least raise questions pertaining to the government’s calculations. The argument usually goes something like this: “I had unclaimed deductions.”
The most famous example of this is United States v. Helmsley, 941 F.2d 71 (2d Cir. 1991). There, the defendant used one method of depreciation on her return. When the government charged her with tax evasion and put on evidence of a deficiency, the defendant argued that there would have been no deficiency had she used an alternative method of depreciation.
In rejecting that argument, the court held: “Absent the Commissioner’s consent, a taxpayer who has used a particular depreciation method may not defend an evasion charge on the ground that, under an alternative method, additional depreciation could have been claimed.” Helmsley, 941 F.2d at 86.
In Sirano v. United States, 377 F.2d 469, 473-74 (1st Cir. 1967), the government introduced evidence that the defendant had understated gross income from his manufacturing business. The defendant argued that the government failed to carry its burden of showing that he did not have labor costs to offset the proved gross receipts.
The court disagreed that the government had any such burden. It cited the rule that applies in tax evasion cases – “that evidence of unexplained receipts shifts to the taxpayer the burden of coming forward with evidence as to the amount of offsetting expenses, if any.” Sirano, 377 F.2d at 473-74.
However, the defendant failed to introduce evidence of labor costs to offset his gross receipts. Therefore, the government had no burden to persuade the jury that the costs were not allowed. However, the court held that if a defendant does offer evidence of offsetting costs, then the government has the burden of persuading the jury that the costs are not allowable.
Next: II. Good-Faith Belief Defense
In accordance with Circular 230 Disclosure
Recent Comments