Graves v. United States
| Decision Date | 07 September 1951 |
| Docket Number | No. 4239.,4239. |
| Parties | GRAVES v. UNITED STATES. |
| Court | U.S. Court of Appeals — Tenth Circuit |
J. Paul Jorgensen, Wichita, Kan. (H. C. Castor, Wichita, Kan., on the brief), for appellant.
Malcolm Miller, Asst. U. S. Atty., Topeka, Kan. (Lester Luther, U. S. Atty., and Eugene W. Davis, Asst. U. S. Atty., Topeka, Kan., on the brief), for United States.
Before PHILLIPS, Chief Judge, and MURRAH and PICKETT, Circuit Judges.
The appellant, Ray H. Graves, was indicted in the District of Kansas on three counts for wilfully attempting to evade and defeat his Federal income taxes for the years 1943, 1944, and 1945, respectively, by making and filing false and fraudulent returns for those years. On trial to a jury he was acquitted on counts one and three covering the taxable years 1943 and 1945. This appeal is from a conviction and sentence on count two covering alleged evasion for the year 1944.
During 1944, Graves owned and operated four drug stores located at Lyons, McPherson, Junction City, and Great Bend, Kansas. These stores were operated by managers who kept books showing daily gross receipts and cash expenditures. In the usual course of business, the gross receipts, less the cash expenditures, were deposited in store bank accounts where the stores were located. At the end of the year the manager's daily receipt and expenditure book was delivered to Mr. and Mrs. Graves in McPherson, where Mrs. Graves maintained a set of single entry "Greenwood Books." The yearly gross receipts from all the stores were entered in the books in one lump sum, but the expenses were itemized and allocated to each store. The income tax returns for the years in question were prepared by Graves' accountant from the Greenwood Books and it is admitted by the government that the return for the year 1944 is in substantial agreement with the Greenwood Books, which are also in substantial accord with the aggregate of the store bank accounts and cash expenditures for that year.
The basis of the government's case is that Graves realized income from the drug stores which was not deposited in the store bank accounts, entered in the Greenwood Books, or reported in his return. This purported income was represented by currency deposits in various special and personal bank accounts of Mr. and Mrs. Graves, purchase of government bonds, sale of cattle, loan of money, and a personal check from a store manager representing store receipts. The evidence in that connection showed that when, in 1945, an Internal Revenue Agent contacted Graves for a routine check on his income tax liability for the years 1942, 1943, and 1944, he was furnished with the Greenwood Books reflecting the gross receipts and itemized expenses of the various stores. When the agent requested bank statements to verify the gross receipts, Graves gave him the statements from four business or drug store accounts and one personal account, and advised him that the store bank accounts, plus the cash expenditures, should equal the gross receipts from the stores. In auditing these bank statements, the agent found a foreign check by Graves on another bank account. When asked about this check, Graves stated that it was on his cattle account and involved a cattle deal which had no bearing upon his drug store business. Since the returns did not show any income from cattle, the agent requested Graves' bank account disclosed by the foreign check. Further investigation disclosed nine other special or personal bank accounts in various banks, in the name of either Mr. or Mrs. Graves, including one at Vinita, Oklahoma, in the name of Mrs. Myrtle Graves, represented by two cash deposits in the early part of 1945. Twelve of these 14 accounts had been active during the year 1944. The investigation also revealed that during the year 1944 Graves had purchased United States Bonds, with currency, in the sum of $5,287.50. There were currency deposits to Mrs. Graves' personal account in the Home State Bank at McPherson, in the total sum of $6,700, and deposits to Graves' special and personal accounts in different banks in various sums, particularly the personal check of Store Manager Cramer in the amount of $4,000. Cramer testified that he had been instructed by Graves to deposit some of the drug store receipts to his personal account and that he did so, retaining duplicate deposit slips for the same, and when, in August, 1944, he was transferred from the Lyons store to the Great Bend store, he gave Graves his personal check for $4,000 representing the amount of store receipts he had deposited to his personal account. In the year 1944, Graves loaned Store Manager Owens $4,000 in currency. The agent was unable to ascertain the source of the currency for this loan and, therefore, treated it as store income for that year. In the same year, Graves received $15,125.84 from the sale of cattle which he had purchased in 1943. Although the cattle were sold for less than their cost, plus feed and pasture, the agent employed the inventory method to treat the receipts as income to Graves in 1944. The agent testified that being unable to ascertain or identify the source of any of these funds, he treated them as income in the year in which they were received or deposited. Thus, by taking the total drug store gross receipts shown by the store bank accounts and the Greenwood Books and adding thereto currency deposits to Mr. and Mrs. Graves' personal and special bank accounts in 1944, the amount of the bonds purchased with currency, the Cramer check for $4,000, the Owens loan for $4,000, the receipts from the sale of cattle, and after making undisputed adjustments, and deducting therefrom the amount of the disbursements and expenses shown by the books, the government agent increased Graves' reported income for the year 1944 by roughly $30,000. A schedule showing this computation was introduced in evidence over Graves' objections. The proof for the taxable years 1943 and 1945 followed substantially the same pattern, showing currency deposits to special accounts and other funds from unidentified sources.
Graves assails this method of proving a willful attempt to...
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