U.S. v. Grasso, 989

Decision Date29 July 1980
Docket NumberNo. 989,D,989
Citation629 F.2d 805
Parties80-2 USTC P 9593 UNITED STATES of America, Appellee, v. Sylvio J. GRASSO, Appellant. ocket 79-1476.
CourtU.S. Court of Appeals — Second Circuit

Henry B. Rothblatt, New York City, for appellant.

Michael Hartmere, Asst. U. S. Atty., D. Connecticut, New Haven, Conn. (Richard Blumenthal, U. S. Atty., District of Connecticut, New Haven, Conn., David H. Beitz, Dept. of Justice, Washington, D. C.), for appellee.

Before KAUFMAN, OAKES, Circuit Judges, and WILL, District Judge. *

PER CURIAM.

This is an appeal from a judgment of conviction entered November 30, 1979 after a bench trial by Judge Daly of the District of Connecticut. A brief history of the case may be helpful. The defendant was first indicted in April 1975 on three counts of alleged tax evasion under 26 U.S.C. § 7201 for the years 1969, 1970 and 1971. A jury trial which commenced November 5, 1975 before Judge Clarie ended in a mistrial declared sua sponte by the court following a key government witness' recantation of his testimony. The case was then reassigned to Judge Zampano, the defendant moved to dismiss the indictment on grounds of double jeopardy, the motion was granted, and the indictment dismissed. 413 F.Supp. 166 (D.Conn.1976).

The government appealed and this Court affirmed. 552 F.2d 46 (2d Cir. 1977). An en banc rehearing petition was denied. 568 F.2d 899 (2d Cir. 1977). The government's petition for certiorari was granted, the judgment vacated and the case remanded in light of United States v. Scott, 437 U.S. 82, 98 S.Ct. 2187, 57 L.Ed.2d 65 (1978) and Arizona v. Washington, 434 U.S. 497, 98 S.Ct. 824, 54 L.Ed.2d 717 (1978). 438 U.S. 901, 98 S.Ct. 3117, 57 L.Ed.2d 1144 (1978). Thereafter, this Court reversed the judgment of the district court and remanded the case for a new trial. 600 F.2d 342 (2d Cir. 1979).

A jury trial was waived and, on the government's motion, count one of the indictment was dismissed. After trial, in which the parties stipulated that all of the evidence in the 1975 trial would be considered by the trial judge except the testimony of three witnesses, the district court found the defendant not guilty on count two and guilty on count three. That count relates to the year 1971.

The government contended that the defendant had taxable income of $71,226 in 1971 and a tax liability of $26,338 as opposed to the $16,646 of reported taxable income and the tax paid of $3,441. At the trial, the government sought to establish that the unreported income exceeded $60,000 through the net worth plus non-deductible expenditures method. The starting point for such a computation of taxable income is the "opening net worth" at the beginning of the tax year or sequence of tax years. As the government concedes, the most difficult item of opening net worth to establish is customarily "cash on hand". In the instant case, the government used a starting date of December 31, 1968 since it originally charged Mr. Grasso with tax evasion in 1969, 1970 and 1971. In its net worth calculations, the government assumed cash on hand at that date of $200 based on an answer Mr. Grasso had given to a question by an IRS Special Agent in 1972 as to how much cash he customarily had on hand. Mr. Grasso explained at trial that he understood the agent to be asking how much cash he kept on his person and not how much cash he had available on that date.

He contended at the trial that the government's 12/31/68 computation of his net worth which totalled $129,000 was inaccurate since it omitted substantial assets including $20,800 in personal savings which his wife and he had, as well as a reserve of $23,950 for bond forfeitures that he kept in cash. He therefore contended that the opening net worth should have been $185,781 or some $57,000 more than that calculated by the government. Since the subsequent year-end and beginning of the year net worth calculations all depend on the accuracy of the initial year's opening net worth, this represents a substantial disagreement in the net worth calculations for the year 1971.

In a criminal tax case, the government has the burden of establishing three essential elements: (1) that an additional tax was in fact due and owing by the taxpayer, (2) that he knowingly and wilfully failed to pay the same, and (3) that he did so in an attempt to evade or defeat the tax. When the government seeks to prove by the net worth method that an additional tax was in fact due and owing, it must prove the following facts: (1) a reasonably accurate opening net worth and closing net worth for the year in question, (2) an increase in net worth in the taxable year comparable to the allegedly unreported income, including an allocation of any increase in net worth or receipt of income over a period of years to establish that it is...

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  • U.S. v. Citron
    • United States
    • U.S. Court of Appeals — Second Circuit
    • 7 Febrero 1986
    ...to be the most difficult component of proof in a tax prosecution by the net worth or cash expenditures methods. See United States v. Grasso, 629 F.2d 805, 807 (2d Cir.1980). In Holland, supra, 348 U.S. at 135-36, 75 S.Ct. at 135, the Court recognized the perils of inadequate evidence relati......
  • U.S. v. Mastropieri
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    • 20 Julio 1982
    ...581 F.2d 28 (2 Cir. 1978), cert. denied, 439 U.S. 1067, 99 S.Ct. 833, 59 L.Ed.2d 32 (1979) (affirming conviction), and United States v. Grasso, 629 F.2d 805 (2 Cir. 1980) (reversing conviction). While the investigation or at least its presentation in the record, see note 3, supra, was not s......
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    ...Likely Source of Income. Petitioner argues that respondent did not prove a likely source of petitioner's unreported income. Based on United States v. Grasso 80-2 USTC ¶ 9593, 629 F.2d 805 (2d Cir. 1980), petitioner argues that respondent erroneously failed to prove that petitioner's law pra......
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    ...C.J., dissenting]; vacated 438 U.S. 901, 98 S.Ct. 3117, 57 L.Ed.2d 1144, on remand, 2nd Cir., 600 F.2d 342, appeal after remand, 2nd Cir., 629 F.2d 805). Moreover, in an affidavit in support of the motion to dismiss the indictment on double jeopardy grounds, counsel admitted that "while in ......
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