United States v. Adams, No. 07-60926 (5th. Cir. 2/17/2009)

• Decision Date: 17 February 2009
• Docket Number: No. 07-60926.,07-60926.
• Parties: UNITED STATES OF AMERICA, Plaintiff-Appellee v. JON DALE ADAMS, Defendant-Appellant
• Court: U.S. Court of Appeals — Fifth Circuit

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UNITED STATES OF AMERICA, Plaintiff-Appellee v. JON DALE ADAMS, Defendant-Appellant

No. 07-60926.

United States Court of Appeals, Fifth Circuit.

Filed February 17, 2009.

Appeal from the United States District Court for the Southern District of Mississippi, USDC No. 3:07-CR-31-1.

Before: WIENER, GARZA, and DeMOSS, Circuit Judges.

PER CURIAM:^*

Defendant-Appellant Jon Dale Adams was convicted on two counts of filing false income tax returns in violation of 26 U.S.C. § 7206(1). H e appeals his conviction, contending that he is entitled to acquittal because the government improperly charged him with one count and, in any event, that there was insufficient evidence to support the jury's verdict. In the alternative, Adams claims that the district court abused its discretion in denying him a new trial. We vacate Adams's conviction as to one count, affirm his conviction as to the other count, and remand for re-sentencing.

I. FACTS AND PROCEEDINGS

Adams is the former owner of Secrets Cabaret strip club and Stardust Oasis bar in Jackson, Mississippi. He filed a federal income tax return for 1999 (the "1999 Form 1040") that failed accurately to reflect at least $450,000, being proceeds of the sale of the strip club in October 1999. Adams signed the inaccurate return and mailed it to the IRS in June 2000. Then, in early 2001, Adams hired accountant and former IRS agent Perry Smith in what Adams's counsel describes as an effort to "get his taxes straight." On February 27, 2001, with Smith's guidance, Adams completed, signed, and mailed a Form 1040X "Amended U.S. Individual Income Tax Return" (the "Form 1040X"), which amended the 1999 Form 1040 to report an additional $450,000 in gross income from the sale of the strip club. The Form 1040X included a jurat signed by Adams, which stated:

Under penalties of perjury, I declare that I have filed an original return and that I have examined this amended return, including accompanying schedules and statements, and to the best of my knowledge and belief, this amended return is true, correct, and complete.

IRS Form 1040X instructs taxpayers to "[a]ttach only the supporting forms and schedules for the items changed." In this case, the supporting form was Adams's Form 4797, which he properly appended to the Form 1040X. In addition, however, Adams also included an unsigned copy of his 1999 Form 1040 together with a copy of his 1999 "Schedule C" — "Profit or Loss From Business" — that had been originally submitted with, and was considered part of, the 1999 Form 1040. The parties agree, and IRS instructions and Treasury regulations confirm, that Adams was under no obligation to submit the 1999 Form 1040 and Schedule C with the Form 1040X. In fact, he was affirmatively instructed not to do so.

In August 2001, again with Smith's assistance, Adams completed, signed, and mailed his 2000 Form 1040 tax return (the "2000 Form 1040"). On that return, he reported gross receipts of $400,423.

In 2002, the IRS assigned Agent Jerry Porter to investigate whether Adams had violated tax statutes in reporting his 1999 and 2000 income. On February 22, 2007, a grand jury indicted Adams, charging him with two counts of filing false income tax returns in violation of 26 U.S.C. § 7206(1). This offense is distinct from tax evasion, which "requires proof of an intention to evade or defeat a tax, whereas § 7206(1) penalizes the filing of a false return even though the falsity would not produce tax consequences." ¹

Count I of the indictment relates to the Form 1040X. It specifically alleges that Adams did not believe the amended return was true "in that the . . . Form 1040X reported gross receipts on Line 1 of Schedule C of the 1999 U.S. Individual Income Tax Return Form 1040 attached thereto as $227,415.21, whereas, as he then and there well knew and believed, he had gross receipts substantially in excess of the amounts reported . . . ." The government contends that Adams had continued to understate his 1999 income by omitting $277,551.46 in gross receipts from the Form 1040X.

Count II of the indictment relates to the 2000 Form 1040. It specifically alleges that on this return Adams had "reported gross receipts on Line 1 of Schedule C as $400,423.00, whereas, as he then and there well knew and believed, he had gross receipts in excess of the amounts reported . . . ."² The government contends that the 2000 Form 1040 understated Adams's income by $66,013.

A jury convicted Adams on both counts. He subsequently filed a Rule 29 motion for judgment of acquittal, or in the alternative, for a new trial pursuant to Rule 33. The district court denied the motion and this timely appeal followed.

II. ANALYSIS

A. Standards of Review

We review de novo the district court's denial of a post-trial motion for judgment of acquittal.³ In reviewing for sufficiency of the evidence, we must affirm the jury's verdict "if a reasonable trier of fact could conclude from the evidence that the elements of the offense were established beyond a reasonable doubt, viewing the evidence in the light most favorable to the verdict and drawing all reasonable inferences from the evidence to support the verdict."⁴ Here, however, Adams's challenge to his Count I conviction is an attack on the sufficiency of the indictment.⁵ When, as here, the defendant has challenged the sufficiency of the indictment in district court, w e review the indictment's sufficiency de novo,⁶ taking its allegations as true.⁷ We review the district court's denial of a motion for new trial for abuse of discretion.⁸

B. Applicable Law

We cannot emphasize too strongly the framework for considering this case It is not a criminal tax evasion case;⁹ it is not a criminal failure-to-file case.¹⁰ It is a perjury case — specifically, the filing of a tax return, under penalty of perjury, that contains false statements, which is criminalized in 26 U.S.C. § 7206(1).¹¹ Under that section, the government has the burden of proving that: "1) the accused willfully made and subscribed to a tax return, 2) the return contained a written declaration that it was made under penalties of perjury, [ ] 3) the accused did not believe that the return was true as to every material matter[,]"¹² and 4) that the return was false as to a material matter.¹³ Here, Count I of the indictment pinpoints precisely the sole material matter that the government, via the grand jury, insists made Adams's Form 1040X false: the amount of gross receipts reported on the copy of the Schedule C from his 1999 income tax return that he included with the Form 1040X. Count II of the indictment also pinpoints precisely the alleged material false statement: the reported gross receipts on the Schedule C from his 2000 income tax return included with that same 2000 return.

C. Motion for Acquittal: Count I — False Form 1040X

1. Relationship of the Form 1040X to the 1999 Schedule C

An amended tax return, Form 1040X, can give rise to liability for filing a false tax return in the same manner as can any other tax return.¹⁴ Additionally, a Schedule C can give rise to liability because "section 7206(1) requires the same duty of honest reporting on schedules as it requires for entries on the Form proper."¹⁵ This liability attaches because "schedules, when appropriate, become integral parts of" the forms to which they relate and "are incorporated therein by reference." ¹⁶

A copy of Adams's 1999 Schedule C had been appended to his original 1999 Form 1040. The government, however, did not seek to indict Adams for making false statements on his 1999 Form 1040, nor could it have, because by the time the government indicted Adams, the applicable statute of limitations barred charges of making a false statement on his 1999 Form 1040.¹⁷ But, if Adams had been so indicted, we would first have asked the relatively straight-forward question whether the 1999 Schedule C was an integral part of the 1999 Form 1040. As we have previously answered that question in the affirmative,¹⁸ we know that a falsity on the Schedule C could have served as the basis for a charge of filing a false 1999 return.

The crime charged in Count I, however, was submitting a false Form 1040X, specifically the Form 1040X to correct Adams's return for the 1999 tax year. Moreover, the indictment based this charge only on the falsity of Adams's 1999 Schedule C, a document that IRS instructions and Treasury regulations indicate Adams need not have and should not have submitted with the Form 1040X.¹⁹ The government nevertheless contends that Adams may be held criminally liable for statements on the 1999 Schedule C because, by signing the jurat on his Form 1040X, he swore to the truth of "accompanying schedules." The IRS argues that this includes the 1999 Schedule C that, despite instructions not to attach it to the Form 1040X, Adams had voluntarily attached. Adams counters that the Form 1040X's jurat cannot be read as extending to the 1999 Schedule C, so that, as a matter of law, he cannot be held criminally liable for any false statements that may appear in that attached schedule. Here is why we agree with Adam s.

The jurat on the Form 1040X states that Adams swears that he "examined this amended return, including accompanying schedules and statements, and to the best of my knowledge and belief, this amended return [no mention of schedules or statements] is true, correct, and complete."²⁰ By specifying that the signer's examination extends to the amended return and all attachments while limiting the signer's assurance of truth, correctness, and completeness to just the amended return, the jurat's language makes a clear distinction between that which Adams examined and that which he swore was true — a classic example of the maxim Inclusio unius est exclusio alterius. In the common case, this distinction is insignificant because accompanying schedules and statements are generally considered integral parts of the return to which the jurat applies.²¹ In this...