United States v. Raub, 9880.

• Decision Date: 19 October 1949
• Docket Number: No. 9880.,9880.
• Citation: 177 F.2d 312
• Parties: UNITED STATES v. RAUB.
• Court: U.S. Court of Appeals — Seventh Circuit

177 F.2d 312 (1949)

UNITED STATES v. RAUB.

No. 9880.

United States Court of Appeals Seventh Circuit.

October 19, 1949.

Kenneth N. Parkinson, Richard L. Tedrow, Washington, D. C., George R. Jeffrey, Indianapolis, Ind., Edward B. Raub, Jr., Indianapolis, Ind. (White, Wright, Raub & Forrey, Indianapolis, Ind., of counsel), for appellant.

B. Howard Caughran, United States Attorney, Indianapolis, Ind., Elba L. Branigin, Jr., Assistant United States Attorney, Maurice W. Graston, Assistant United States Attorney, Indianapolis, Ind., for appellee.

Before MAJOR, Chief Judge, and KERNER, and DUFFY, Circuit Judges.

KERNER, Circuit Judge.

Defendant appeals from his conviction on a charge of wilfully attempting to evade payment of a large part of his income and victory taxes for the year 1943 by filing a false and fraudulent tax return. He was sentenced to five years' imprisonment and to pay a fine of $3,000. He admits developing and putting into operation a plan calculated to postpone the incidence of his tax on certain items of his income until a later year, and contends that such plan was worked out with advice of counsel and was in all respects legal. Errors asserted on this appeal relate to the denial of his motion for acquittal and to certain portions of the instructions to the jury.

There is little if any controversy as to the mode by which defendant sought to defer the incidence of his tax and the steps by which the plan was put into effect. He was engaged in several lines of business including an 80% interest in a partnership with one Helen Smith in an agency for the distributorship of trucks and tractors in Chalmers, Indiana. He also operated an insurance agency in which one Ora Rickenbaugh was employed. The partners sought to defer the taking of profits from the sale of trucks and tractors by what they described as a change in their investment from trucks to real estate on which there would be no profits until the sale of the latter. According to defendant's own description of the plan, Rickenbaugh was to obtain a dealer's license and acquire at cost certain trucks from the partnership. She would then sell the trucks to the trade at O.P.A. prices, repay the partnership the purchase price thereof from the proceeds of sale, and invest the profits in farm lands in the Chalmers area, re-selling the farm lands to the partnership at a loss amounting approximately to the difference between the cost of the trucks to her and the selling price thereof, less a reasonable profit to be retained by her. Defendant asserts that before this plan was put into operation, he and his partner sought and obtained the advice of lawyers, a tax consultant, and two representatives of the Collector's Office of the Bureau of Internal Revenue.

In accordance with this plan, Rickenbaugh purchased twenty-one trucks from the partnership approximately at cost, and then sold them for a profit. Defendant states that he "assisted in effecting substantially all of the sales." The record discloses that, in fact, while Rickenbaugh acquired and conveyed title to the trucks in her own name, payment therefor was made from the proceeds of the sales to others, as made, and that she at no time had funds of her own with which to finance the purchases in her own behalf. The record further discloses that in the sales of the trucks all negotiations were carried on by defendant, and that in many cases purchasers did not even know Rickenbaugh or understand why her name was used in connection with their purchases.

With reference to the purchases of real estate the record discloses a similar domination of the transactions by defendant. He chose the farms to be purchased; he negotiated with the owners for their purchase; where necessary, he furnished funds to cover checks on Rickenbaugh's account as down payments; title was taken in his name rather than in the name of both partners; he negotiated a loan in his name to make payment.

There is no dispute as to these facts as to all of the transactions incidental to the execution of the plan admittedly adopted for the purpose of enabling the partnership to "change the form of its investment from trucks to land and defer or postpone the question of tax determination until the land, or new form of investment was disposed of." There is serious difference of opinion as to the construction to be placed upon these facts. Defendant contends that the plan was adopted only after he had been fully advised of its legality after full disclosure of its details. The Government contends that the entire plan was simply a subterfuge to enable defendant to defeat and evade a large part of his taxes for the year 1943; that, in effect, Rickenbaugh was acting as the agent of defendant throughout, and the net result of the series of transactions was a profit taken in her name amounting to at least $17,286 on the sale of the twenty-one trucks, followed by the purchase in her name of two farms at a cost of $32,000 which she in turn sold to defendant for $14,000, or a paper loss of $18,000 on the series of transactions, thus concealing the profit of the partnership on the trucks in approximately that amount, so that defendant's tax return for the year 1943 which did not reflect his share in this partnership profit was in fact false and fraudulent.

Under the facts disclosed we think there can be little doubt of the sufficiency of the evidence to sustain a verdict of guilt, hence that defendant's motion for acquittal was properly denied. The jury might well infer that the elaborate scheme by which paper title to the trucks and farms was put into Rickenbaugh without the payment by her of any money of her own but with the entire series of transactions financed by funds supplied by defendant or the partnership or out of the proceeds of the sale of partnership property was nothing but a subterfuge to defeat taxes legally due. And the jury might well conclude from the testimony of four of the persons whose alleged advice as to the legality of the transactions was relied upon as a defense that the facts were not fully disclosed to them. The tax consultant testified that he understood that the transactions between defendant and Rickenbaugh were to be at arm's length; one of the attorneys stated that he thought they were to be in good faith and that the only question defendant asked him was whether there was anything to prevent his transferring trucks to an employee; one of the employees of the Collector's Office clearly was not qualified to render advice and told defendant so, referring him to a second one who testified that he advised that transactions of the nature described would be subject to further investigation to show whether or not they were legal.

We conclude that if the only question here were as...