Harris v. United States, 16074.

• Decision Date: 08 May 1957
• Docket Number: No. 16074.,16074.
• Citation: 243 F.2d 74
• Parties: Milton J. HARRIS, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

243 F.2d 74 (1957)

Milton J. HARRIS, Appellant, v. UNITED STATES of America, Appellee.

No. 16074.

United States Court of Appeals Fifth Circuit.

April 9, 1957.

Rehearing Denied May 8, 1957.

COPYRIGHT MATERIAL OMITTED

Arthur B. Cunningham, Philip T. Weinstein, Cunningham & Weinstein, Miami, Fla., for appellant.

E. David Rosen, Asst. U. S. Atty., James L. Guilmartin, U. S. Atty., Miami, Fla., for appellee.

Before TUTTLE, JONES and BROWN, Circuit Judges.

TUTTLE, Circuit Judge.

This is an appeal from a judgment of guilty and sentence following a jury verdict finding that the appellant "did wilfully and knowingly attempt to defeat and evade a large part of the income tax due and owing by him to the United States of America for the calendar year 1946 * * *."

The principal ground of appellant's appeal is the admission by the trial court, over objection, of evidence tending to show that certain deductions claimed by the taxpayer were duplicated as deductions claimed by his wholly owned corporation after the Government had, by its bill of particulars, indicated that the prosecution was based solely on the failure of the taxpayer to include a single $45,000 item of income. There are other contentions as to alleged improper admission of evidence as to prior years and incorrect charge and comments to the jury.

Soon after the indictment was returned the appellant filed his motion for a bill of particulars which the trial court granted in part.¹ It is apparent that the defendant asked for and got an order requiring particulars as to the items making up the gross income and of deductions allowed or disallowed in determining the net income which is charged against the defendant. The court refused to require any answer from the Government as to "whether it is claimed that defendant wilfully and knowingly deducted from his gross income for the year 1946 items which were not legally deductible, and if so the nature or kind of such items."²

During the course of the trial there was evidence that amply authorized the jury to find that Harris individually earned and collected in 1946 a $45,000 real estate commission and that he did not include it on his personal income tax return for that year filed in Miami, Florida. The Government then produced evidence to the effect that this amount was reported on the tax return of the M. J. Harris Company, a Cleveland, Ohio corporation, which had a net loss for the year of over $39,000 (including loss carry-overs from 1944 and 1945), after including the item of $45,000. It thus became apparent that if the $45,000 item was truly income to Harris he would profit by returning it as income to the corporation, because on account of the claimed loss position of the corporation it would owe no tax on it at all.

In order to prove the element of wilfulness which is an ingredient of the offense charged, the Government undertook to prove several things that were calculated to show that this was not a mere unintentional mistake by Harris. That it was such a mistake, of course, however much it benefited him taxwise, would be a defense to the criminal proceedings if believed by the jury. It is the offer and admission of this proof that is the basis of appellant's principal attack here.

The first serious objection on the trial came when the Government sought to prove, as it did, that of the $28,714.28 of deductions claimed by Harris on his personal return, $17,605.16 of them were also claimed by the M. J. Harris Company as deductions for the same calendar year. This was proved by an analysis of Harris' personal expense sheet and of the company's expense sheet. Identical expenditures were found to have been entered on both records and were taken as deductions in the returns signed by him in one instance as an individual and in the other as president of the corporation.

The defendant vigorously assailed the action of the trial court in permitting any mention to be made of "deductions." He contended that the Government's bill of particulars admitted the deductibility of the $28,714.28 and that it would be improper for the court to permit the Government in any way to attack the validity or bona fides of a single dollar of the expenditures comprising this sum.

Upon the Government's representation that it proposed to show double deductions — once by Harris individually and once by his corporation — the court admitted the evidence solely as proof of the taxpayer's intent to defraud.

The court cautioned the jury on several different occasions that this evidence was not to be considered by them as proof of the correct amount of taxable income, but was admitted only as a circumstance to show Harris' intent in attributing the $45,000 income item to the corporation.

There is no merit in the appellant's criticism of the action of the trial court in this respect. In the first place it is to be noted that the court declined to require an answer to defendant's inquiry whether he wilfully and knowingly deducted items which were not legally deductible, but only required, as to deductions, that the Government show the amount of deductions allowed or disallowed in computing the net income of the taxpayer. This circumstance, of itself, was ample notice to defendant that the Government would not be precluded from attacking the defendant's alleged practice of taking the same deduction twice. This, of course, could only be shown by proof of the deductions taken, which proof the defendant objected to. Moreover, if the bill of particulars had not been granted as to only a part of the inquiries made by the defendant we are satisfied that there is no rule of law that would have prevented the Government from showing, if it could, that some of the deductions were of a highly suspicious nature, not in an effort to increase the deficiency in the tax, but to show the defendant's knowledge and thus his intent as to what he was doing when he incorrectly attributed the income item to that taxpayer which had an excess of deductions over income. There is nothing in the case of Bryan v. United States, 5 Cir., 175 F.2d 223, or the case of United States v. Neff, 3 Cir., 212 F.2d 297, relied on by appellant, contrary to what we hold here.

The Government also tendered, and appellant objected to the introduction, of testimony in the form of a statement signed by the appellant following a question and answer session with a special agent. This evidence included statements that the accused had not filed any personal income tax returns since "the thirties" because, as he stated, he had been advised by the revenue agent that if he operated all his business and paid all his personal expenses through a corporation he need file only a corporation return. The statement also included an explanation by Harris of why he split a certain payment into five parts and opened five separate bank accounts, and also an explanation that he guessed he had failed to report a large payment "because I was up to my neck in marital troubles and stayed away from Cleveland and my records." Other evidence objected to included testimony by the agent that Harris had told him this story and that he had advised Harris as to the true requirements.³

There was also testimony objected to by appellant to the effect that substantial disbursements, carried as deductions from income, represented payments to Harris' wife and mother-in-law and some represented payments to rare stamp dealers.

We think the court properly admitted all of this evidence for the purpose of showing the defendant's knowledge as to his obligation to return and his wilfulness in evading this obligation and pay income taxes. In view of his statement that he had a corporation that paid his personal expenses but that he nevertheless made no personal return, it was certainly competent for the Government to show the personal nature of some of the payments made by him to demonstrate how fantastic his claimed understanding of the law really was. Moreover, his personal return which is the basis of the indictment carried the statement that he had filed a return for the year 1945. The Government, of course, should be permitted to prove this statement to be false by showing that he had filed no personal return for 1943, 1944 or 1945, which proof defendant also objected to.

There is no merit in the appellant's criticism of the admission of the signed statement on the ground that it contained hearsay. An admission signed by the accused that is relevant to the issue being tried is, of course, an exception to the hearsay rule. While cautioning lower courts that such admissions, if a...