Sansone v. United States

• Decision Date: 26 October 1964
• Docket Number: No. 17399.,17399.
• Citation: 334 F.2d 287
• Parties: Michael C. SANSONE, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

334 F.2d 287 (1964)

Michael C. SANSONE, Appellant, v. UNITED STATES of America, Appellee.

No. 17399.

United States Court of Appeals Eighth Circuit.

July 17, 1964.

Certiorari Granted October 26, 1964.

Merle L. Silverstein, St. Louis, Mo., made argument for appellant and filed brief with Stanley M. Rosenblum, of Rosenblum & Goldenhersh, St. Louis, Mo., and Thomas Wadden, Jr., Washington, D. C.

William C. Martin, Asst. U. S. Atty., St. Louis, Mo., made argument for appellee and filed brief with Richard D. FitzGibbon, Jr., U. S. Atty., St. Louis, Mo.

Before VOGEL, MATTHES and BLACKMUN, Circuit Judges.

Certiorari Granted October 26, 1964. See 85 S.Ct. 159.

BLACKMUN, Circuit Judge.

Michael C. Sansone, age 41, after a plea of not guilty, was convicted by a jury of a willful and knowing attempt, in violation of 26 U.S.C. § 7201, to evade and defeat his federal income tax for the calendar year 1957. He had been charged in a 2-count indictment with a violation of this statute for both 1956 and 1957 but was acquitted as to 1956. Judge Harper imposed a $2,000 fine and a 15-month sentence. The defendant appealed.

The case comes down to the omission from Sansone's 1957 return of about $20,000 in long term capital gain realized upon the disposition of real estate. That the gain was realized, that it was not reported, and that it should have been reported are conceded by the defense.

The issues are (A) whether the admissible evidence established the essential element of willfulness on the part of Sansone and (B) whether he was entitled to lesser-included-offense instructions. On the first issue the admissibility of an after-the-fact affidavit executed by Sansone and given to an investigating intelligence agent assumes vital importance.

The objective facts are not in dispute. Sansome and his wife in 1956 and 1957 lived in a Saint Louis suburb. They filed joint returns for both years. Their 1957 return as filed showed adjusted gross income of $7,585 and taxable income of $2,963. The income reported consisted of Mrs. Sansone's salary as a teacher, sums received by Mr. Sansone from the Department of the Air Force, and his net income as a securities salesman. It was stipulated that the taxpayers earned and received these items in 1957. The return disclosed no capital gain or loss and no other income.

On December 6, 1955, Sansone obtained from House Hunters, Inc. an option to purchase certain land in Saint Louis County. In the following February he exercised this option and a contract for sale was signed. It ran from the vendor to the Sansones. It specified a price of $22,500, payable $17,500 in cash and $5,000 by a purchase money deed of trust on part of the real estate.

Sansone at the same time effected a sale of a portion of the land to D-X Sunray Oil Company for $20,000. Land Title Insurance Co. of St. Louis handled both Sansone's purchase and his sale to Sunray. It closed the two transactions simultaneously and issued the Sansones its check for $2,891.71. This was the amount remaining after appropriate charges and after debiting the Sansones for their $22,500 purchase price and crediting them for the $20,000 Sunray proceeds plus the deed of trust obligation. Both deeds were filed for record on March 21, 1956. This Sunray transaction resulted in 1956 gain which was not reported and which was the subject of the first and acquitted count of the indictment.

In August 1957 Sansone sold another portion of his tract. This was to Tremarco Corporation and was for a gross price of $27,000. This time Land Title issued the Sansones its check for $21,671.67, representing the net payable to them after vendor's expenses and after payment of the amount due on the deed of trust. The deed to Tremarco was immediately recorded. This Tremarco transaction resulted in 1957 gain which was not reported and which was the subject of the second and convicted count of the indictment.

In summary and to repeat: The defendant purchased a tract of land in March 1956 for $22,500. He promptly sold a portion of the same land for $20,000. In 1957 he sold another portion for $27,000. The gains realized on these respective sales were not reported in the Sansone returns for 1956 and 1957.

On the question of willfulness the government's case rested primarily upon the testimony of Steve Milosevich, of Revenue Agent John J. Conley, and of the defendant himself, and upon Sansone's own written statement hereinafter mentioned. Because of the difficulty and sensitivity of the issue, we review this evidence in some detail.

Milosevich was Mrs. Sansone's brother. He operated a delicatessen-sandwich shop. He had had some experience as a junior accountant. He prepared the Sansones' 1956 and 1957 returns. He testified that at the time he prepared the 1956 return he was "not sure" he had information that the Sansones "had a real estate transaction" but "I think at that time I may have been aware that there was" one. He also said that he prepared the 1957 return from work sheets presented to him by the taxpayers; that there was no information on those sheets pertaining to any real estate transaction other than real estate taxes paid; that again he was "not sure" whether he knew at the time he prepared the return that the Sansones had sold a piece of property; and that he learned about the real estate transaction through conversations with the Sansones but that he did not "recall exactly when it was".

Conley was a special agent with the Intelligence Division. He and Agent Purk conferred with the Sansones in May 1960. They then lived in Phoenix, Arizona. The agents saw the defendant at his home on three successive days beginning May 3. On May 5 Conley took from the defendant a written statement subscribed and sworn to by Sansone before Conley and denominated an affidavit. This was prepared by Conley. It was admitted into evidence at the trial over objection. The statement twice recites that it was made voluntarily and goes on to state that the affiant understood it, that it was made without threat or promise of immunity, and that he had been advised as to his constitutional rights. It further recites that the Sansones' returns for 1956 and 1957 (and for 1958) were prepared by Milosevich from work papers compiled by Mrs. Sansone, and

"I did not report the 1956 sale in our 1956 joint income tax return because I thought that I was entitled to recover my entire cost before reporting any sales in my income tax returns. I did not report the 1957 sale in our joint income tax return for 1957 because I was burdened with a number of financial obligations and did not feel I could raise the money to pay any tax due. It was my intention to report all sales in a future year and pay the tax due. I knew that I should have reported the 1957 sale, but my wife did not know that it should have been reported. It was not my intention to evade the payment of our proper taxes and I intended to pay any additional taxes due when I was financially able to do so.

"My brother-in-law, Steve Milosevich, knew that we had this real estate and had made several sales, but he did not advise us whether or not to report the 1956 and 1957 sales and the matter was not discussed with him as he merely prepared the returns from the workpaper we gave him in these years."

Conley testified that he adjusted the 1956 return to reflect the Sunray sale; that this was a short term capital gain; that he determined basis on the part sold by allocating to it a portion of the cost of the entire tract; that this allocation was based on assessed valuations approved by the Sansones on Land Title's closing statement; that he adjusted the 1957 return to include the long term capital gain on the sale to Tremarco; and that he used the assessed valuation method for determining basis of the Tremarco tract.

On cross-examination Conley testified that there are a number of approved methods for apportioning cost; that when Agent Purk made allocations for the later actual payment of the tax he used a method based on front footage; that the Sansones produced for the agents all the documents they requested, and made a place available for them in which to work; that, apart from the omission of the sales in the returns, he found no evidence that the defendant attempted to conceal any part of these transactions; that the checks the Sansones received were deposited without concealment; that the affidavit did not cover all the discussions had with the Sarsones; that they discussed Fish Pot Creek which ran through the real estate; that, although the defendant was not present when the affidavit was typed, he had approved a rough draft and was given the opportunity to add anything he wished; that he examined the Sansones' bank statements; that their May 1958 statement showed a balance of $9,286.74; and that Sansone had said he wanted to pay his tax.

The defense for the 1957 case is largely concerned with Fish Pot Creek. This stream ran through the Sansone property west of the portions sold to Sunray and Tremarco. The claim is that Sansone was confronted with large capital expenditures required to correct conditions which the creek had created; that these expenditures would be far greater than any gain realized in the 1957 sale; that any meaningful development was necessarily delayed until the Missouri Highway Commission concluded its plans for improvements to Manchester Road which bordered the property at the south and under which the creek flowed; that Sansone honestly believed that he could wait until these expenditures were ascertained and then determine whether he had any gain on the entire tract; that, although he now knows this was erroneous, it nevertheless was an honest belief which he held when his returns were filed; and that he did not intend to avoid payment of any taxes.

In support of this defense Sansone himself took the stand. He testified that his own average income in 1954 through 1956 was around $3,000 to $3,200...