II. FEDERAL STATUES, JURY INSTRUCTIONS, AND CASE LAW

A. Elements of tax evasion and failure to file, proper jury instructions, and burden of proof as to the criminal action (as opposed to civil or deficiency action).

1. Statutes for failure to file and tax evasion: Please note that 26 U.S.C.A. § 7201 et seq. contain several different criminal provisions, but I only included Tax Evasion and Failure to File.

26 U.S.C.A. § 7201. Attempt to Evade or Defeat Tax (Tax Evasion).

Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.

26 U.S.C.A. § 7203. Willful failure to file return, supply information, or pay tax. Please note that at the bottom of this section, it is a felony to willfully fail to file for violating section 6050I, which pertains to cash receipts (which might include negotiable instruments) in one transaction (or 2 or more related transactions) of greater than $10,000 acquired by a business while in the course of that business. This might really hit your clients hard if money deposits are considered business transactions.

Any person required under this title to pay any estimated tax or tax, or required by this title or by regulations made under authority thereof to make a return, keep any records, or supply any information, who willfully fails to pay such estimated tax or tax, make such return, keep such records, or supply such information, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $25,000 ($100,000 in the case of a corporation), or imprisoned not more than 1 year, or both, together with the costs of prosecution. In the case of any person with respect to whom there is a failure to pay any estimated tax, this section shall not apply to such person with respect to such failure if there is no addition to tax under section 6654 or 6655 with respect to such failure. In the case of a willful violation of any provision of section 6050I, the first sentence of this section shall be applied by substituting "felony" for "misdemeanor" and "5 years" for "1 year".

2. Proper Jury Instructions on Tax Evasion:

U.S. v. Masat, 948 F.2d 923 (5th Cir.(Tex.) Dec 03, 1991) - tax evasion instructions (not just whether the transactions were gifts or loans).

Page 931:

Masat also contests the district court instructions regarding the essential elements of tax evasion under 26 U.S.C.A. § 7201.FN13 To establish a violation of section 7201, the Government must prove beyond a reasonable doubt: (1) the existence of a tax deficiency; (2) an affirmative act constituting evasion or attempted evasion of the tax; and (3) willfulness. See United States v. Kim, 884 F.2d 189, 192 n. 1 (5th Cir.1989) (citation omitted); United States v. Chesson, 933 F.2d 298, 303-04 (5th Cir.1991), cert. denied, 502 U.S. 981, 112 S.Ct. 583, 116 L.Ed.2d 608 (1991) (citations omitted).

Pages 931-32, n.15:

FN15. The district court instructed the jury:

An act is done knowingly if it is done voluntarily. The purpose of adding the word, "knowingly," in an indictment is to insure that no one would be convicted for an act done because of mistake, accident, or other innocent reason. Willfulness is an essential element of the crime of tax evasion. A person acts "willfully" in regard to the offenses charged against the defendant, if he voluntarily and intentionally violates a known legal duty; specifically, a person acts willfully if: (1) he commits such a violation for the purpose of depriving the government of taxes and revenues imposed by and derived from the income tax laws; (2) it is the legal duty of such person to make such payments to the government; and (3) such person knows it is his legal duty to make such payments.

Defendant's conduct is not "willful" if he acted through negligence, even gross negligence, inadvertence, justifiable excuse or mistake, or due to his good faith misunderstanding of the requirements of the law. In this connection the defendant contends that he had a good-faith misunderstanding of his obligations under the law. Whether such a good-faith misunderstanding exists or not is a question of fact for your determination. You are instructed that if you find defendant, in good faith, did not understand his legal obligations, he is entitled to an acquittal. However, you are also instructed that mere disagreement with the law does not constitute good faith misunderstanding of the requirements of the law. It is the duty of all persons to obey the law whether or not they agree with it.

Willfulness necessarily depends upon the defendant's state of mind at the time of the acts or omissions with which he is charged. Intent may be established through inferences drawn from the facts and circumstances established by the evidence.

The government contends that the defendant filed income tax returns in the years prior to the years charged in the indictment. If you find that the defendant did file returns in previous years, you may infer that the defendant knew the law required him to make and file returns. Such knowledge may be considered by you as a circumstance bearing upon the question of whether the defendant's conduct was willful.

[8] The term willful means a voluntary, intentional violation of a known legal duty. *932 See Chesson, 933 F.2d at 304 (citation omitted). The district court explained this term.FN16 Masat's main argument is that the district court should have instructed the jury that the Government must prove that he acted in bad faith or with evil intent. In Cheek v. United States, 498 U.S. 192, 111 S.Ct. 604, 609-10, 112 L.Ed.2d 617 (1991), on remand, 931 F.2d 1206 (7th Cir.1991), the Court similarly noted that willfulness simply means a voluntary, intentional violation of a known legal duty. The Court did not expressly adopt the bad purpose or evil motive language which Masat requested. Thus, the district court's instruction was adequate and embodied the applicable law.FN17

<  >