The taxpayer argued that the Government could not charge him under § 7201 because § 7206(5) was the more specific and thus is the exclusive charge that should / could be brought for the conduct alleged. Bottom-line, the court concluded that the conduct alleged could have been charged under either provision and that the Government had the choice as to which of the two to charge. The Court reasoned:
1. The two provisions are not coterminous because many actions that could violate § 7206(5) would not violate § 7201. In the course of this discussion, the Court noted in a footnote:
During oral argument, government counsel provided an illustrative example of the type of conduct that falls within the scope of § 7206(5), but is not covered by § 7201. A drug dealer may have an outstanding tax obligation and decide to submit an offer-in-compromise. On the Form 656, the drug dealer may falsely state that the "source of funds" is legitimate business activity, but otherwise fill out the forms accurately and correctly. Under those circumstances, the drug dealer could not be prosecuted for tax evasion under § 7201 because there is no affirmative act of evasion or an intent to evade the payment of taxes. Yet, the drug dealer could be prosecuted under § 7206(5) for lying about the "source of funds" because that statute punishes any person who falsifies any document relating to the financial condition of the taxpayer submitted in connection with an offer-in-compromise. See Tr. of 9/17/10 Hr'g at 47-48.The example is a good one. The same example is often used to describe the difference between § 7201 and § 7206(1), tax perjury. If the drug-dealing taxpayer misdescribed his or her business on Schedule C but otherwise correctly reported his or her tax liability, that person could be charged with tax perjury but not tax evasion.
