Criminal Tax Manual 26 USC 7201

Tax Evasion (General Charge) - 26 USC § 7201

Section 7201 of the Internal Revenue Code (26 USC 7201) makes it a Federal crime or offense for anyone to willfully attempt to evade or defeat the payment of federal income taxes.

The Defendant can be found guilty of that offense only if all of the following facts are proved beyond a reasonable doubt:

First: That the Defendant owed substantial income tax in addition to that declared in tax return; and

Second: That the Defendant knowingly and willfully attempted to evade or defeat such tax.

The proof need not show the precise amount of the additional tax due as alleged in the indictment, but it must be established beyond a reasonable doubt that the Defendant knowingly and willfully attempted to evade or defeat some substantial portion of such additional tax as charged.

The word "attempt" contemplates that the Defendant had knowledge and an understanding that, during the particular tax year involved, had income which was taxable, and which the Defendant was required by law to report; but that nevertheless attempted to evade or defeat the tax, or a substantial portion of the tax on that income, by willfully failing to report all of the income which knew had during that year.

Federal income taxes are levied upon income derived from compensation for personal services of every kind and in whatever form paid, whether as wages, commissions, or money earned for performing services.

The tax is also levied upon profits earned from any business, regardless of its nature, and from interest, dividends, rents and the like.

The income tax also applies to any gain derived from the sale of a capital asset.

In short, the term "gross income" means all income from whatever source unless it is specifically excluded by law.

On the other hand, the law does provide that funds acquired from certain sources are not subject to the income tax.

The most common non-taxable sources are loans, gifts, inheritances, the proceeds of insurance policies, and funds derived from the sale of an asset to the extent those funds equal the cost of the asset.

ANNOTATIONS AND COMMENTS

26 USC §7201 provides: Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title [shall be guilty of an offense against the United States.]

Maximum Penalty: Five (5) years imprisonment and $250,000 fine (or $500,000 in the case of a corporation), plus the costs of prosecution. See 26 USC § 7201 and 18 USC § 3571.

United States v. Carter, 721 F.2d 1514, (11th Cir. 1984), requires a detailed explanation to the jury concerning the Government's theory-of-proof (Net Worth, Bank Deposits or Cash Expenditures, Instruction Nos. 68.2, 68.3 and 68.4) and it is plain error not to give such an instruction, i.e., no request is necessary.

See Special Instruction 9 for instruction on the concept of intentional violation of a known legal duty as proof of willfulness.