Thursday, January 9, 2020

Court Affirms Denial of Reliance on Tax Professional Jury Instruction (1/9/20)

In United States v. Wright, 2019 U.S. App. LEXIS 37713 (6th Cir. 2019) (Not Published), here, the Court affirmed the conviction and sentencing of the defendant, Wright.  As suggested by the failure to publish the opinion, there is nothing particularly new or noteworthy in the opinion. I do, however, offer the flavor from the opening paragraph:
This is the second time that James Wright has attempted to conceal income from the United States government. n1 In this instance, Wright underreported his income by claiming improper deductions to a subchapter S-corporation and engaged in self-dealing with a private foundation to pay for his children's tuition. A jury convicted Wright of seven counts of filing, or aiding in the filing of, false tax returns in violation of 26 U.S.C. § 7206. The district court sentenced Wright to 33 months in prison and ordered him to pay $146,404 in restitution. Wright appeals, alleging that the district court abused its discretion by refusing to give a jury instruction on good-faith reliance on accountants and lawyers. Wright also challenges the procedural reasonableness of his sentence, asserting  that the district court improperly calculated the amount of loss stemming from the false tax returns. We AFFIRM.
   n1 In 1998, Wright pleaded guilty to tax evasion for using trusts to conceal insurance-commission income. United States v. Wright, No. 97-cr-64 (S.D. Ohio).
 JAT Comment:

1. Although a defendant would want the reliance on tax professional instruction, it is really baked into the general willfulness instruction.  The willfulness instruction, which the court must give, says that the defendant can be convicted of the tax perjury offense, § 7206(1), only if the taxpayer acted willfully – with intent to violate a known legal duty.  Defenses such as good faith and reliance on tax professional are inherent in the requirement that the Government prove that the defendant did not act in good faith.  Accordingly, although the Sixth Circuit held that Wright did not satisfactorily put reliance on tax professional in issue with evidence sufficient to mandate a specific reliance instruction, the defendant was free to argue that he acted in good faith and had a good faith belief that he was not violating a known legal duty.  See See, e.g., United States v. Montgomery, 747 F.3d 303, 311 (5th Cir. 2014).  He just did not get an instruction that would draw the jury’s particular attention to that defense.

2. My experience is that persons convicted once avoid the conduct in the future.  Even if they continue the conduct, the IRS and DOJ Tax may not learn of the next round(s) and even if they do might not see any value if wasting further criminal investigation or prosecution resources on the same taxpayer.  But, the IRS and DOJ Tax has to bring some of these cases just to remind people that one conviction does not give a free pass for misbehavior.

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