tag:blogger.com,1999:blog-1519969502186924526.post7330802919101287872..comments2023-10-24T08:00:53.865-05:00Comments on Federal Tax Crimes: Willfulness - What Does It Really Mean in Tax Cases? (5/7/10)Jack Townsendhttp://www.blogger.com/profile/14469823736335455874noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-1519969502186924526.post-26254760261060201062010-05-09T09:26:16.041-05:002010-05-09T09:26:16.041-05:00Mr. Townsend very interesting but are you sure the...Mr. Townsend very interesting but are you sure the system works that way at least in the tax arena? From what I can tell (outside of the tax protester arena) if the Government says a tax transaction doesn’t work (thus, a tax is arguably due and owing) and the Government claims the taxpayer lies in any way about such transaction, that is criminal tax fraud. See Stein. The lie can even be the result of a transaction which is difficult for the IRS to discern (not an actual lie). See Klein. Of course the tax law provides that taxpayers can take tax positions which are nonfrivolous (10% chance of success); reasonable basis (20% to 30% chance of success); substantial authority (30% (maybe less) to 50% chance of success); more likely than not (50.1% chance of success). Note the chance of success is based on pursuing all legal remedies through the Supreme Court. Most of the structured tax transactions are based on literal readings of the tax code with deference given to case law. If it is not a crime to take a tax position with a 10% chance of success (which the law clearly allows for), how can any of the structured tax transactions be criminal especially given the SCT decision in Gitlitz where the taxpayer won based on a literal interpretation of the law notwithstanding the lack of economic substance? What transaction doesn’t have a 10% chance of success via a jury trial? There was even a case a couple of years ago in Colorado, Sala, which involved a so called SOS transaction wherein the court allowed the taxpayer a $60 million deduction from a transaction that the Government claimed was a sham and had no economic substance yet in the criminal cases regarding the exact same type of transaction many received a life of torture in a U.S. torture chamber (prison). Sala was so bad that after the fund manager had been depo’d for the civil trial, the criminal Government lawyers got him to recant his testimony but the Sala judge after reviewing the “new” depo rejected it and still decided in favor of the taxpayer. While the legal rhetoric is calming, I would submit there is no standard and if the Government is mad at you and can get others to lie (to save themselves like the fund manager in Sala), one could end up a tax criminal regardless of any standard related to willfulness.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-35310478934994722062010-05-07T22:07:44.432-05:002010-05-07T22:07:44.432-05:00Steve, I hope some other readers will weigh in on ...Steve, I hope some other readers will weigh in on this, because I have not really considered the issue of the interpretation or application of the concept of civil fraud being different than criminal evasion. With that warning, what I have rattling around in my brain (and I am sure I have spoken or written it -- at least mispoken or miswritten it) is that the two are the same only with differing burdens of proof on the Government. But, since you raise the issue, I don't recall the Cheek standard -- intentional violation of a known legal duty -- being parroted in civil cases. <br /><br />I am sure that some of the readers have thought about it and can give an authoritative discussion, so I hope they respond.Jack Townsendhttps://www.blogger.com/profile/14469823736335455874noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-83044243107798848772010-05-07T19:00:54.024-05:002010-05-07T19:00:54.024-05:00Jack:
I have always thought the civil fraud burde...Jack:<br /><br />I have always thought the civil fraud burden (intention to evade a tax known or believed to be owed) is actually higher as a practical matter than the willful element for criminal tax violations (intentional violation of a known legal duty). If so, how did that happen? <br /><br />A good one for your students to ponder?STEVEN M HARRISnoreply@blogger.com