1 (Slip Opin i o n) OCTOBER T ERM, 20 07 Sy llabu s
N O TE : Wh er e it i s feas ibl e , a s y llab u s (h ead n ot e) wil lbe rel e as ed , as is bein g d o n e incon n ecti onwithth is cas e , a tth e ti meth e op in i o n is is s u ed

. Th e s y ll abu s con s titu tes n o p a r t of th e op in i o nof th eC o u r t bu t h a s be en pre p are dbyt h e Re po rte ro f De ci sio n s fo r t h e co nveni e nce of t h e reade r
. Se e United Statesv. Detroit Timbe r& Lumb er Co., 200U. S

. 3 21, 337

. 

# SUPREME CO URT O F THE UNI TED STATES

Sy llabu s 

### BOU L WAR E v . UNITE D STATE S
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT No. 06–1 50 9. Ar g u ed Janu a r y8, 2008—Dec i ded M a r c h3, 2008 On e elemen t of taxev asionu n d er26 U. S. C. §7201 i s “ t h e ex isten c e of

ata x deficiency.” Sansonev. United States , 380 U. S. 34 3 , 351. Peti

t i oner Boulwa re wa s cha r ged wit hcrim i na l ta x eva s iona n d filing a fa ls e incom eta x ret u rn for divert ing fund s froma clos ely held corpo

ration, HIE, of which he wa s the president, founder, and controlling sh ar eh older

. To su ppor th i s ar g u ment that the Gov e rnment c o uld not est abli s h the taxdefic i enc yr e quir edto c o nv ic t him, Boulwar e sought to introduce evidence that HIE had no earnings and profits i n t h e releva ntt a xab l e yea r s , s ohe ineffect received distributions of propert yt h a twere ret u rnsof ca pita l, u p to h i s b a si s inh i s stoc k, wh ic har e n o t tax able, see 26 U. S. C. §§301 an d 3 1 6 (a). Un der §301( a), u n l ess th e In ter n al Rev e n u eCode r e qu ir es oth e r w ise, a “dis

tr ibution of pr oper ty” “made bya c o r p or ation to a shar e h olderwith
r e spec t to its stoc k sh all be tr eated in the manner provided in [§301(c )].” Sec t ion301(c ) pr o v ides th at th e por t ionof th e distr ibu t i on th at i s a “div i d en d,” as defi n e d by§316( a) , mu st be in c l u d ed inth e recipient ’ s gro s s incom e ; a n d t h e port ion tha tis not a dividend is , de

pending on the shareholder’s basi s fo r his stock, either a nontaxable
r e tu r nof c a pital ora tax able c a pital g a in

. Sec t ion316( a) defin e s “di

vidend” a s a “dis trib ution” out of “ea r ning s a n d profits

. ” The Dis t rict Cour t g r anted the Gov e rnment’ s in liminemotion to bar evidence
s u pport ing Boulwa re’s ret u r n -of-ca p it al th eory, relying o nthe Ninth Circuit ’s Miller decis i on t h atadivers ion of funds in a crim i na l t a x ev asionc a se maybe deeme da r e tu r nof capitalonly if the taxpayer
orc o r p or ation demonstr ate s that th e di stributions were intended to b es u ch aret u rn
. The co u r tla t e r found Boulwa re’s proffer of evi

dence insuffici ent under Mil ler a n d declin ed t oinst ructt h e j u ry on his theory. I na ffirming his convic tion, the Ninth Cir c uit held that2 BOULWARE v. UNITED STATES Sy llabu s Boulwa re’s proffer wa s properly rej e ct ed u n der Miller because he of

fered no proof that the amou nts diverted w e re intended as a return of capital when they we re made. Held: A dis t rib u t ee a ccus e d of crim i na l ta x eva s ion m a y cla i mret u rnof-c apital tr ea tment withoutpr oduc ing e v i d ence that, when the dis

t r ib ut ion occu rred, eit h erh eor t h e co rpo r a t ion int e nded aret u rn of
c a pital. Pp. 6–17.

(a) Tax classif i cations like “divid end” and“return of capital ” turn on a tr ansac t i o n’ s “objec tiv e ec onomicr e alitie s,” not “th e par t ic ular form the parties emp l oyed.” Frank Lyon Co. v. United States , 435 U. S. 561, 573

. Inec on omic r e ality , a sh a r eh older ’ s in for m al r e c e ip t of corporate property “may be as effec t iv e a mean s of distr ibu t i n g profits among stockholders as the fo r m al dec l ar ationof a div i den d ,” Palmerv. Co m m i ssioner , 302 U. S. 6 3 , 6 9 , oras effec t i v e a mean s o f returning a shareholder’s capital, see ibi d

. Economic substance re

mains the tou c hstone for c h ar ac ter i zin gfu n d s th at a s h ar eh olderdi

v e r t s befor etheyc a nbe r e c o r d ed ona c o r p or ation ’ s books. Pp. 6–8.

(b) Miller’ s v i ew th at a r e tu r n -of-c apital d e fen s e r e qu ir es ev iden c e of acorres p onding cont em pora neou s intent s i ts uncomfortab l y not only with the tax law’s economic rea lis m, but al so wi th t h e par t ic ular
wor d in gof §§301 an d 316( a)

. As th ese se c t ion s ar e wr itten , th e t a x consequences of a corporati o n’s di str ibut i on made wi t hr e spec t to stock depend, not on anyone ’s purpose to retur n c a pital o rg e t it bac k, but on facts wholly indepe ndent of int e nt : whet he r t h e corpo r a t ion had earnings and profits, and the amount of th e tax p ay er ’ s basis fo r h i s stoc k. Th e Millercou r tcould cla i m no t e xt ua l hook for it s con temporaneous intent requirement, bu t ar g u ed th at it av oided su p posed an om ali e s. Th e c o u r t, h o wev e r, mistaken lyr e aso n ed th at ap

ply i n g§§301 an d 316(a) inc r i min a l c a ses u n n e c e ssar ilyemph asize s the deficiency’s amount while ignori ng the willfulness of the intent to evade taxes. Willfulness is an el ement of the crimes bec a use the sub

stantive provisions defining tax ev asion and filing a false return ex

pressly require it, see, e.g. , §720 1. Noth i n gin§§301 an d 316(a) r e lieves the G o vernment of the bu rden of proving willfulness or impedes it fr om doing so i f there is evi d ence of willfulness. The Miller court also erred in finding it trouble s ome th at, without a con

temporaneous intent requirement, a shareholder distributee would b eimmune from punis h ment if the corpora t ion ha d no ea rnings a n d profits butconvicted if the corporat ion did have earning and profits. An a c q u it t a l in t h e form er i n s t a n ce would in fa ctres u lt m e rely from the Gov e r n ment’ s failur e to pr ov e anelement of the crime. The fac t th at ash ar eh olderof a su c c e ssfu l corpora t ion m a y have differentt a x liab ility from a shareholder of a corporation without earnings and pr ofits mer e lyfollows fr om t h e way§§301 an d 316( a) ar e wr ittenan d3 Cite as: 55 2 U

. S. ____ (2008) Sy llabu s fr om §7201’ s t a xdefic i en c y requ ir emen t. Ev enif th er e wer ec o mpel

ling reasons to extend §7201 to cases in which no taxes are owed, Congres s , not the J u dicia r y, would have t odo the rew r iting. Pp. 8– 12.

(c) Milleralso su ffer s fr om it s ow nan omali e s. Fir s t, §§3 0 1 an d 3 1 6 ar e odd st alk s forg r aftin ga c o n t emporaneous intentrequirement. Correct application of their rules will ofte n become pos s ible only a t the end of the corporation’s tax year , regardless of the shareholder or corpora t ion’s unders t a n ding months ea rlier whe napa rt icula rdis t ri

bu tionmayh av ebeenma de. M o r e ov er, §301(a), wh ic hex pr essly pr ov ides thatdistr ibution s made with r e spec t to sto c k “shall be tr eated in the mannerpr ov ided in [§ 301(c )],” ostensi b ly provides for all v a r i a t ion s of taxtr ea tme n tof su c hdist r ibu tion s u n l ess a sep a r a t e Code provisio n requires otherwise. Yet Millereffect ivel y conve r t s t h e section into o n e of merely partial coverage, leav ing t h e t a x s t a t us of one class of di stributions in limbo incrim i na l ca s e s
. Allowing §6 1 ( a) of the Code, which definesgross income, “[e]xcept as o t herwise pro

v i ded,” as “al linc o me fr om whatev ers o u r c ed e r iv e d , ” t o s t e p i nw h e r e §301( a) h a s be enpu sh ed aside wou l d san c tiony e t an oth e recc e n t r i c ity : §301(a) wo u l d n o t c o v e r wh at it say s i t“sh a ll,” (di s tr i b u t ion s with
r e spec t to stoc k forwhic h no mor e specifi cprovision is made), while §61(a) wou l d h av eto applyto wh at byits ter m s it sh ou ld n o t (a r e c e ipt of fundsforwhic h taxtr eatment is “other wise pr ov ided” in §301( a)). Millererred i nrequ iring cont em pora neous int e nt , a n d t h e Nint hCircuit ’ s j u dgm e nthere, rel y ing o n Miller , is likewise errone

ou s. Pp. 12–14.

(d) This Court declines to ad dre ss the Gover n ment’ s ar gument that the judgment should be affi rmed onth e gr ou n dth at befor ean ydis

tr ibution maybe tr eated as a r e tur nof capit a l, it mus tfir s t be di s tributed to the shareholder “with resp ect to .

. . stock.” The facts in this ca s ehave not b een ra k e d over with th a tcondition in mind, a n d
an yc a n v as of ev iden c ean d Bou l war e ’ s pr offersh ou ld be made by a court familiar with the entire evid entiary record. No r will the Court take up in the fir s t inst anc ethe question whether an unlawful diver

sion may ever be dee m ed a “distribution .

. . with respect to [a corpo

r a tion ’ s ] stoc k.” Pp. 14–17. 470 F. 3d 93 1, v a c a ted an d r e man d ed.

S OUTER , J ., del ivered the opi n ion forauna nimous Court._________________

_________________ 1 Cite as: 55 2 U

. S. ____ (2008) Opinion of theCourt

NOTIC E : Th is op i n ionis subjec t to f o rma lrevi si onbef o r e publicat ioninth e p r eli m in ary p rin t of th e U n it edS t at es R e p o rts

. R e ad ers ar e r e qu es ted to n o tif yth e R e p o r t e rof D e c i s i on s , Su p r em e C o u r t of th e U n ited St at es , Wa s h

ington, D. C. 2054 3, of any typ o gra p hical or other f o rmal err o rs , in or der th atc o rr ect i on sm a y b e mad eb e f o r e th ep r e lim in aryp rin t go es t o p r es s
. 

# SUPREME CO URT O F THE UNI TED STATES

No. 06–1 50 9


### MICHA E L H. B O ULWARE, P E TI TIONE R v. UNITE D STATE S
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEAL S FOR THE NINT H CIRCUIT [M ar c h3, 2008] 

### J USTICE 

### S OUTER

### delivered the opinion of the C o urt. Sections 301 and 316(a) of the Internal Revenue Code set the conditions for treating cer t ain corpor ate distribu

tions as ret u rns of capital, nontaxable to the recipient. 26 U. S. C. §§301, 316(a) (2000 ed. and Supp. V.). The question here is whether a distributee accused of criminal tax evasion may claim return-of-capital treatment with out producing evidence that eitherhe or the corporation intended a capital return when the distribution occurr ed. We hold th at no such showing is required. I “[T]he caps tone of [the] system of sanctions .

. . calculated to induce .

. . fulfillm ent of every duty under the income tax law,” Spi e sv. United S t ates , 317 U. S. 492, 497 (1943), is 26 U. S. C. § 7201, making it a felony willfully to “attemp[t] i nany man n er to evade or defeat any ta x imposed by” the Code. 1 

### One eleme n t of tax evasion under §7201 is “t he existence of a tax deficiency,” Sansonev.

——————

1 A related pro v ision, 26 U. S. C. §720 6(1) , criminalizes the willful filing of a tax return believed to bemateri ally false. See n. 9, infra

.2 BOULWARE v. UNITED STATES Opinion of theCourt 

### United S t a t es , 380 U. S. 343, 351 ( 1965); see a l so Lawnv. UnitedS t ates , 355 U. S. 339, 361 (1958), 2 

### wh ich the Gov

ernment must prove b e yond a reasonable doub t, see ibid. (“[O]f cours e , a conviction upon a charge of a ttempting to evade asses sment of in come taxes by the filin g of a fraud ulent return cannot s t and in th e absence of proof of a deficiency”). Any deficie n cy determination in this case will turn o n §§301 and 316(a) of the Code. Acco rding to §30 1 (a), unless another provision of th e Code requires otherwise, a “distribution of property” that is “made by a corporation to a shareholder with respect to its stock shall be treated in the manner provided in [ § 301(c)].” Under §301(c), t h e portion of t h e distribution that is a “dividend,” as definedby §316(a), must be included in the recipient’s gross income; and t h e portion t hat is notadividend is , depending on the shareholder’s basis for his stock, either a nontaxable return of capital o ra gain on the sale or exchange of stock, ordinarily taxa ble to the shareholder as a capit a l gain. Finally, §316(a) defines “dividend” as “any distrib u tion of property made by a corporation to its sharehol ders— “(1) out of its earnings and profits accumulated after February 28, 1913, or “(2) out of its earnings and profits of the taxable year (computed as of the close of the taxable year without diminution b yreason of any distributions made during the ta xab l e year), wi thout regar dto the amount of the earnings and profits at the time the

——————

2 “[T]he elements of §7 201 a r e willfulness[,] the ex istence of a tax defic i en c y , . . . an d anaffi r m ativ e ac t c o n s titu tin ganev asionorat

temptedev asi o n of the tax

. ” Sansonev. United Stat es , 38 0 U. S. 3 4 3 , 351 ( 196 5). Th e Cou r ts of Appeal s h a v ediv i ded ov erwh eth e rth e Gov e rnment must pr ov e the taxdefic i enc yis “sub st anti al,” see United Statesv. Da ni els , 387 F. 3d 636, 64 0–6 41, an d n

. 2 (CA7 20 04) (c ollec t

ing cas e s ) ; we do not addres s that is s u e here.3 Cite as: 55 2 U

. S. ____ (2008) Opinion of theCourt 

### distribution was made.” Sections 301 and 316(a) together thus make the existence of “earnings and profits” 3

### the decis i ve fact in determining the tax con s equences of distributio ns from a corporation to a shareholder with respect to his stock. This requiremen t of “relatingthe taxst atus of cor p orate dist ributions to earnings and profits i s responsiv e to afelt need for protecting retu rns of capit a l from tax

. ” 4 Bitt ke r & Lo kken ¶92.1.1, p. 92–3. II In this cri minal taxproceeding, petition er Michael Boulware was char ge d withse veral counts of tax evasi o n and filing a false income tax return, stemming from his diversion of funds from Ha waiian Isles Enterprises (HIE), a closely he ld corporation of which he was the president, founder, and controlling (though not sole) sha r eholder. At trial, 4

### the United State s sought to establish that Boulware had received taxable income by “sy s tematically divert[in g] funds from HIE in orde r to support a lavish lifestyle.” 384 F. 3d 794, 799 (CA9 2004). The Government’s evidence showed that

——————

3 Although the Code does not “compr ehens ively define ‘ea r nings a n d profits,’ ” 4 B. Bittker& L. Lokken, Fede r a l Tax a tion of Inc o me, Estate s an d Gifts ¶92.1.3, p.92–6 (3 d ed. 2003) (h er ein a fterBitt ker& Lokken) , the “[p]rovisions of the Code and re g u lations r e latingto ear n ing s and profits ordinarily take taxab l e in c o me as the point of depar t ur e,” id ., at 92– 9.

4 The trial at issue in this ca se wa s ac tu all yBou l war e ’ s sec o n dtr ial
on§§720 1 an d 72 06( 1) c h ar g e s, h i s c o n vic tion s onth o s e c o u n t s ina n ea rlier t r ia l h aving b een va ca t e d b yt h e Nint h Circuitfor rea s ons not a t issu e h e r e , see 384 F. 3d 7 9 4 (200 4). Inthat ear liertr ial , Bou l war ewas a l s oconvict e d of cons pira cyt oma ke fa lse s t at em ents t oafedera lly insured financial ins t itut ion, in violat ion of 18 U. S. C. §3 71. The Ninth Circuita ffirm ed Boulwa re’s cons pira cy conv ict i on t h a tfirs t t i m e a r ound, howe ver, s othe pres ent tria l did not include acons pira cy cha r ge
.4 BOULWARE v. UNITED STATES Opinion of theCourt 

### “[Boulware] gave millions of dol l ars of HIE m o ney to his girlfriend .

. . and million s of dollars to his wife .

. . without rep o rting any of this money on his p e rsonal income tax returns. . . . [H]e sipho n ed off this money primarily by writing checks to employees and friends and havingthem retur nthe cash to him, by divertin g payments by HIE cus t omers, by submitting fraudulent invoices to HIE, a n d by laun dering HIE money through companies in the Kin g dom of Tonga and Hong Kong. ” Ibid

. In defense, Boulware sought to introduce evidence tha t H I E had no retained or current earnings and profits in the relevant taxable years, with the consequence (he argued) that he in effect received distrib u tions of property tha t must have been returns of capit a l, up to his basis in his stock. See §301(c)(2). Because the return of capital was nontaxable, the argum e nt went, the Government could not establish the tax deficiencyrequired to convict him. The Government moved in limineto bar evidence in support of Boulware’s return-of

- capital th eory, on t h e grounds of “irrelevan[c e ] in [this] criminal tax case,” Ap p. 20. The Government relied on the Ninth Circuit’s decision in United S t atesv. Mill er , 545 F. 2 d1204 (1976), in which that court held that in a crimina l tax evasion case, adiversion of funds may be deemed a return of capital only after “some demonstration on the part of the taxpayer and/or the corporation that such [a distribution was] intended to be such a r e turn,” id. , at 1215. Boulware, the Government argued, h a d offere d to make no such demonstration. App. 21. The Distric tCourt gr anted the Government’s motion, and when Boulware sought “to present evidence of [H IE’s] alleged over-reporting of income, and an offer of proo f relating to the issue of .

. . dividends,” id. , at 135, th e District Court denied his reque st. The court said that5 Cite as: 55 2 U

. S. ____ (2008) Opinion of theCourt 

### “[n]ot only would much of [his proffered] evidence be e x cludable as expert legal opinion, it is plainly insufficient under the Miller case,” id ., at 138, and accordingly declined to instruct the j u ry on Bou l ware’s ret u rn-of-capit al theory. Th e jury rejected his alternative defenses (that the diverte d funds were nontaxable corporate advances or loans, or th at he used the moneys for corporate purposes), and found him guilty on nine cou n ts, four of tax evasion and five of filing a false return. The Ninth Circuit affi rmed. 470 F. 3d 931 (2006). It ack n owledged that “imposin g an intent requirement cre

ates a disconnect between civilan d criminal l i ability,” but thought th at under Miller , “ t h e character i zation of diverted co rp orate fund s for civil tax pu rpos es does not dictate thei r chara cter i zation for purposes of a criminal tax evasion charge.” 470 F. 3d, at 934. The court held the test in a criminal case to be “whe ther the de fendant has willfully attempted to evade the payment or assessment of a tax.” Ibid

. Because Boulware “ ‘p resented no concret e proof that the amou nts were considered, intended, o r recorded on the corporate records as a return of capital at the time t h ey were made,’ ” id ., at 935 (q uoting Mill er , supra , at 1 215), the Ninth Circuit held that Boulware’s proffer was “properly rejecte d .

. . as inadequate,” 470 F. 3d, at 935. Judge Thomas concurred because the panel was bound by Miller , but noted that “Miller—and now the majorityopinion—hold that a defendant may be criminally sanctioned for tax evasion withou t ow ing a penn y in ta xes t o the govern ment.” 47 0 F. 3d, at 938. That, he said, not only “indicate[s] a l o gical fallacy, but is infl at contradi ction with the tax evasion statute’s requirement .

. . of a tax deficiency.” Ibid . (internal quotation marks omitted). 5

——————

5 Judge Thomas went on to say th at the Gov e rnment would pr ev ail even without Miller’s rule b e ca us e, in his view, Boulwa re’s divers ions6 BOULWARE v. UNITED STATES Opinion of theCourt 

### We granted certiorari, 551 U. S. ___ (2007), t o resolve a split among the Courts of Appeals over the application of §§301 and316(a) to informally transferred or diverted corporate funds in criminal tax proceedings. 6

### W en o w vacate and remand. III A The colorful behavior described in the allegations requires a reminder that tax classifications like “dividen d” and “retur nof capital” turn on “the objective economic realities of a transaction rather than .

. . the particul a r form the parties empl oyed,” Frank Lyon C o
. v. United Sta t es , 435 U. S. 561, 5 73 (1978); a“givenresult at the en d of a straight path is not made adifferent result .

. . b y following a devious path,” Minnesota Tea Co. v. Helv erin g , 302 U. S. 6 09, 613 (1938). 7 

### As for distributions with re­

—————— wer e “unlawful,” and the r e tur n -of- capital rules would not apply t o div e r s ion s ma de forun lawful pu r p oses. See 470 F. 3d, at938– 93 9.

6 As n o ted, th e Nin thCir c u it h o lds th at §§3 01 an d 31 6(a) ar e n o t to be
cons ulted in acrimina l ta x eva s ion ca s e until the defenda n t produces
ev idenc eof an intent to tr e a t div e r t ed fu nds as a r e tu r nof c a pital at th e time it w a s m a de. Se e 470 F. 3d 9 31 (20 06) (c a s e below). By cont ra s t , t h e S e cond Circuita l lows a crim i na l defenda n tt o invoke §§301 an d 31 6 ( a) with ou t ev iden c eof a c o ntempor a n eou s in ten tto tr ea t s u ch m o ne ys a s ret u rns of c a pita l. S ee United States v. Bok , 156 F. 3 d 157, 16 2 (1 99 8) (“[I]nr e tu r nof c a pit a l c a ses, at a x p ay er ’ s in ten tis n o t determinative in defining th e taxp ayer’scond uct”). Meanwhile, th e Third, S i xt h, a n d E l event h C i rcuit s a r guab l y have t a ken t h e pos i t i on th at §§30 1 an d 316(a) ar e a l tog e th erin applic able inc r i min a l taxc a se s involving info rmal dis t ribut i ons. See United Stat esv. Williams , 875 F. 2d 846, 850 –85 2 (CA1 1 1 989); United Statesv. Gold b erg , 330 F. 2d 30, 38 (C A3 1 964); Davis v. United Stat es , 226 F. 2d 3 3 1 , 334– 33 5 (CA 6 195 5); bu t se e Br ief forPetition er16 (“[ T]h ese c a ses c a nbe r e ad to address the allocation of th e burden of proof on the re turn of capital issue, r a therthan the applic able substanti v e principles”)

.

7 We hav ealso r e c o gnized that “[t]he leg a lr i gh t of a tax p ay erto decrease the amount of what otherwise would be his tax e s, oraltog e ther
av oid them, bymeans whic h the law per m its, c a nnot be doubted. ”7 Cite as: 55 2 U

. S. ____ (2008) Opinion of theCourt 

### spect to sto c k, in econo m ic reality a shareholder’s informal receipt of corporate pr operty “ma ybe as effective a means of distributing profits among stock h olders as the formal declaration of a di vidend,” Palm er v. Com m issioner , 302 U. S. 63, 69 (1937), or as effective a means of returning a shareholder’s capital, see ibid

. Accordingly, “ [ a] distribution to a shareholder in his capacity as such . . . is subjec t to §301 even though it is not declared in for m al fashion

. ” B. Bitt ker & J. Eustic e, Federal Income Taxation of Cor

porations and Shareho l ders ¶8.05[1], pp. 8–36 to 8–37 (6 th ed. 1999) (hereinafter Bittke r& Eustice); see also Gardner, The Tax Consequences of Sh areholder Diversions in Close Corporations, 21 Tax L. Rev. 223, 239 (1966) (hereinafter Gardner) (“Sections 316 an d 301 do not require an y formal path to be taken by a corpor ation in order for those provisions to apply”). There is no reason to doubt tha teconomic substance remains the right touchstone for characte rizing fund s received when a shareh older di vert s them before they can be recorded on the corporation’s book s. While they “never

—————— Gregoryv. Hel v erin g , 293 U. S. 46 5, 46 9 ( 1 935). Th e r u le is a two-way street: “while a taxpayer is free to organize his affairs as he chooses, nevertheles s , once having d o ne s o , hemust a ccept the tax cons eq uence s of his choice, whet her co ntemplated or no t, . . . and may not enjoy the b e nefit of s o me other route he might have chos en to follow b u t did not,” Com m i ssioner v. National Alfalfa Dehydrating & Milli ng Co. , 41 7 U. S. 134, 1 49 ( 197 4); see al so id. , at 148 (r efe r r i n gto “th e establi s h e d ta x principle t h a t at r a n sa ct ion is t o b egiven it s t a x effectin a ccord wit h wh at ac tu allyoc c u r r e d an d n o t inac c o rd withwh at migh t h av eoc cur r ed” ) ; Found e rs Ge n. Corp. v. Hoey , 300 U. S. 268, 275 (19 37) (“To make the tax abil i tyof the tr ansac t ion depend upon the determina t ion wh eth e rth er e ex isted analt e r n ativ e for m whic h the stat ute did not tax
wou l d c r e ate bu r d enan d u n cer t ain t y” ). The question here, of course, i s notwhet her a l t e rna t ive rout es ma y have offered b e t t e r or wo rs e t a x cons eq uences , s ee genera llyIs enb e rgh, R e view: Mus i ng s on Form a n d Su bst a n c e inTax a tion , 49 U. Ch i. L. Rev

. 859 (1 98 2); r a th er , it i s “whether wha twas done .

. . was the thi n gwhich the sta t ute[, her e §§301 an d 3 1 6 ( a),] in ten d ed,” Gregory , sup r a , at 469.8 BOULWARE v. UNITED STATES Opinion of theCourt


### even pass through th e corporation’s hands,” Bittker & Eustice ¶8. 05[9], p. 8–51, even diverted funds may be seen as dividends or capitaldistributions for purposes of §§30 1 and 316(a), see Truesd ell v. Commissioner , 89 T. C. 1280 (1987) (treating diverted funds as “constructive” distributions in civil tax proceedings). The point, a g ain, is that “taxation is not so much conc erned with the refinements of title as it is with a ctual com m and overthe prope rty taxed—the actual benefit for whic h the tax is paid.” Cor l

issv. Bo we rs , 281 U. S. 376, 378 ( 1930); see a l so Griffith s v. Commiss i oner , 308 U. S. 355, 358 (1939). 8 

### B Miller’s view that a cri minal defen d ant may n o t treat a distribution as a retur nof capital without ev idence of a corresponding contemp o raneous intent sits un comfortably not only with the tax law’s economic realism, but with t h e particular wording of §§301 and 316(a), as well. As th ose sections are written, the tax consequences ofa “distribution by a co rporation with respect to its stoc k” depend, no t on anyone’s purpose to return capi tal or to getit back, bu t on facts wh olly independent of intent: wheth e r the corp oration had earnings and profits, and the amount of the taxpayer’s basis for his stock. Cf. True sdell v. Commis

sioner , Internal Revenue Service (IRS) Actionon Decision 1988–25, 1 988 WL 57 0761 (Sept. 12, 1988) (r ecommendation regard ing acquiescence); IRS Non Docketed Servic e

——————

8 Thus in the period between th is Cou r t’ s dec i sion s in Com m i ssioner
v. Wilcox , 327 U. S. 404 (19 46) (h oldin ge m bezzledfu n d s to be n o n t ax able to the embezzler) and James v. Un it edSt at es , 366 U. S. 213 (19 6 1 ) (overr uling Wi lcox , holdingembezzled fund s to be tax abl e inc o me), the Gover n m e ntr o ut inely a r gu ed t h a t diverted funds wer e “ c ons t ruct iv e d i s t rib u ti ons , ” t a xab l e t othe re ci p i ent as dividends. See generally Gar d n e r237 ( “Wh ile Wilcox was good law, the s a fest wayto ins u re that bothth e c o r p or ationan d t h e sh ar eholder would be taxed on their respective gain from the diverted f u n d s w a s to label th e mdiv i den d s”); 4 Bittker& Lokken¶92.2(7), p. 92–2 3, n

. 37.9 Cite as: 55 2 U

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### Advice Revi ew, 1989 WL 1172952 (Mar. 15, 1989) (reply to request for reconsideration) (“[I]ntent is irrelevant. . . . [E]very distribution made withrespect to a shareholder’s stock is taxable as ordinary incom e , capital gain, or not at all pursuan t to section 301(c) dependent upon the corporation’s earnings and profits and the shareho l der’s stock basis. The determination is computational and not dependent upon intent”). When the Miller cour t went the other way, needless to say, it could claim no textual hook for the co ntemporaneous intent requiremen t , but a r gu ed for it as the wa y to avoid two supposed anomalies. First, the court thought that applyi ng §§301 a n d 316(a) in criminal cases unnec e ssarily emphasizes theexact amo unt of defi ciency while “completely ignor[ing] one essenti a l element of the crime charged: the willful intent to evade taxes . . . .” 545 F. 2 d , at 1214. B u t there is an analytical mistake here. Willfulness is anelement of the crim e s charged because the substantive provisions defining tax evasion and filing a false return expressly require it, see §7201 (“Any person who willfully attempts . . . ”); §72 06(1) (“Will fully makes and subscri bes . . . ”). The element of willfulness is addressed at trial by req u iring the Government to prove i t

. Nothing in §§301 and 316(a) as written (tha t is, without an intent requirement) relieves the Govern ment of this burden of proving willfulness or i m pedes it from doing so if evidence of willfulness is there. Those two sections as written simply addre ss a differ e nt elem en t of criminal evasion, the existence of a tax deficiency, and both deficiency and willfulness can be addressed straightforwardly (in jury instructions or bench findings) without tackin g an intent requirement onto the ru le d i stinguishin gdividends from capita l returns. Second, th e Miller court worried that if a defendant could claim capital tre atment wit h out showing a corresponding and contemporaneous in tent,10 BOULWARE v. UNITED STATES Opinion of theCourt 

### “[a] ta xpay er who di verted funds f r om his close corporation whe nit was inthe midst of a financial difficulty and h a d no earnings and profits would be immune from punishment (to the extent of his basis in the stock) for failure t o re port such sums as income; while that very same taxpay er would be convicted i f the corpora t ion had experienced a successful year and had earnings and profits.” 545 F. 2d, at 1214.“Such a result,” said the court, “would constitute an extreme example of form over substance.” Ibid. The Circuit thus assumed that a taxpa y er like Boulware could be convicted of evasion with no sh owing of deficiency from an unreported dividend or capital gain. But the acquittal that the author of Miller called form trumping s ubstance would in fac tresult from the Government’s failure to pr ove an e l em ent of thecrime. Ther e is no criminal tax e v a s ion without a taxd e ficiency, see supra , at 1 –2, 9

### and there is no deficiency owing to a distri­

——————

9 Bou l war ewas also c o n v ic ted of v i olatin g§720 6(1), wh ic h makes i ta felony “[w]illfully [to] mak[ e] and su bscri b[e] any return, statement, or other docume nt, whic h cont a i ns or is v e r i fied bya wr it tendec l ar atio n tha tit is ma de under the pe na lties of perjury , a n d whic h [the ta xpa y er] does not belie v eto be tr ue and c o rr ec t as t oev erymater i al mat t er .” He
a r gues t h a tif t h e Nint hCircuiterred, it s error ca lls int o q u es t i on n o t on lyh i s §7201 c o n v i c tion , but h i s §72 06(1) c o n v ic tionas well. Br ief for Petitioner15

– 16. Althoughthe Co urts of Appea l s a r e una nimous in h o ldin gth at §720 6(1) “doe s n o t r e quire the prosecution to prove th e existence of a tax deficiency,” United States v. Tarwat er , 308 F. 3d 494, 5 0 4 (C A620 02 ); s ee al s o United Stat es v. Peters , 153 F. 3d 445, 46 1 (CA7 1 998) (c ollec t in gc a ses), it is ar g u able th at “th e n a tu r e an d ch ar a c t e r of t h e funds received c a n b ecrit i ca l in det e rm ining whet her

. . . §7 2 0 6 ( 1 ) has b een viola t ed, [even if] proof of a ta x deficiency is unne cessar y , ” 1 I. Comisky , L. Feld, & S. H a rris, Tax Fraud & Evasio n ¶2.03[5], p. 21 (200 7); see al so Br ief forPe tition er15 –1 6

. Th e Gov e rn men tdoes n o t ar g u e th at Bou l war e ’ s §§720 1 an d 72 0 6 (1) c o n v ic tion s should be tr ea ted differ e ntlyat this stage of the proceedings, howeve r, and we will accede to the Go vernment’s wo rking assumpt i on here that th e §§7201 an d 7206( 1) c o n vic tion s stan d o rfall tog e th er
.11 Cite as: 55 2 U

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### bution (received with respect to a corporation’s stock) if a corporation has no ea rnings and profits and the value distributed does not exceedthe taxpayer-shareholder’s basis for his stock. Th us the fact that a shareholder distributee of a successful corporatio n may have different ta xliability from a shareholder of a corporation without earnings and profits merely follows from the way §§301 an d 316(a) are written (to distinguish dividend from capital return), an d from the requireme nt of tax def i ciency for a §7201 crim e
. Without the deficiency there is nothing bu t some act expressing the will to evade, and, under §7201, acting on “bad intentions, alone, [is] not punishable, ” United Sta t esv. D’A gos t ino , 145 F. 3d 69, 73 (CA2 1998). It is neitherhere nor there whether the Miller court wa s justified in thinking it would improve things to convict more of the evasively inclinedby dropping th e deficiency requiremen tand finding some other device to exemp t returns of capital. 10 

### Even if there were compelling reasons to extend §7201 to cases in which no taxes a r e owed, i t bears repeating that “[t]he spiri tof the doctrine whic h denies to the federal judi ciary p o wer to c r e ate crimes forthrightl yadmonishes that we should not enlarge th ereach of enacted crimes by constituting them from anything less than the incriminating components contemplated by the words used in the statute,” Morisse ttev.

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10 “A better[me t hod of ex em ptingr e turns of c a pital fr om tax a tion]
c o u l d n odou b t be dev i sed.” 4 Bit t ker& Lokken¶92.1.1, p. 9 2–3; se e ibid. (s ug ges t ing, for e x a m ple, t h a t“ a ll receipt s fro macorpora t ion could b et r ea ted a s t a xable incom e , a n d acorre ct ion fora n y res u lt ing
ov er tax a tion could be made in c o mp uting gain or loss when stock is sold, ex c h ang e d, orbec o mes w o r t h l ess”); see also An dr ew s, “O u tof its Earnings and Profits”: So me Reflecti ons o nthe Taxatio nof Dividend s, 69 Harv . L. Rev

. 1403, 14 39 (195 6) (c r i tic i zin gth e ear n i n g s an d pr ofit s concept“ [ a] s adevice fo r s e pa ra t i ng incom e fromret u rn of ca pit a l,” a n d sug g e stingthat “[d] istr i b uti o ns whic h ought to be tr eat e d as r e tur nof
c a pital [c ould] be br ough t within the co nce p t of a partialliquidat i on by special provisi o n”).12 BOULWARE v. UNITED STATES Opinion of theCourt 

### United S t a t es , 342 U. S. 246, 263 (1952) (opinion for th e Court by Jackson, J.). If §301, §316(a), or§7201 cou l d stand amending, Congress will hav e to do the rewriting. C Not only is Miller dev o id of the support clai med for it, but it suffe rs the dem e rit of some anomalies of its own. First and m o st obviously, §§301 and 316 are o d d stalks fo r grafting a contemporaneous intent requiremen t , given the fact that the correct application of their rules will oft e n become k n own only a tthe end of the corporation’s tax year, regardless of the shareh older’s or corporation’s understandingmonths earlier when a particulardistribution may have b een made. Section 31 6(a)(2) conditions treating a distribution as aconstru ctiv e dividend by reference to earnings and profits, and earnings and profits are to be “computed as of the cl ose of the t a xable year .

. . withou t regard to the amount of the earnings and profits at the time the distribution was made.” A corporati o n may make a deliberat e distribution to asha r eholder, with everyone expecting a profitable year and considering the distribution to be adividend, o n ly to ha ve the shareholder end up liable for no tax if th e companycloses out its ta x year in the red (so long as the shareholder’s basis covers the distribution); when such facts a r e clear at the time the reporting f o rms and returns are filed, 11 

### the shareholder does not violate §7201 by pa ying no tax onthe moneys received, intent being beside the point. And since intent to make a distribution a taxable one cannot control, it would

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11 S o m e t i m e s t h es e fa ct s a r e notclea r, a n din cert a i n cir c um s t a n ces a c o r p or ationmaybe r e qu ir ed to assu me it is pr ofi t able. Forex ample, th e in str u c t ion s to IRS For m 1 0 99–DIVpr ov ide th atwh ena corpora t ion is uns ure whether it ha s su fficient earnings and profits at the end of the taxable ye ar to co v e ra distr ibu t i onto sh ar eh older s , “the entir e pay m ent must be r e por t ed as a div i dend.” See http://www .irs .gov/pub/irs -pdf/i1099div .pdf (as vis i ted Feb. 15, 2008,
an d av ailable i nCler k of Cour t’ s c a se file).13 Cite as: 55 2 U

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### be odd to condition non t axabl e return-of-capit al treatment on contemporaneous in tent, when the statute says nothing about intent at all. The intent interpretati on is strange for anot h er reason, too (a reason in some tension with the Ni nth Circuit ’s assumption thatan u n reported d i stribution without contemporaneous intent to return capital will support a conviction for evasion). The text of §301(a) ostensibly provides for all variations of tax tre atment of distributions received with respect to a corpor ation’s stock unless a separate pr ovision of the Code requires otherwise. Yet Miller effectively converts the se ction into one of merely partial cov e rage, withthe result of leaving one class of distributions in a tax status limbo in criminal cases. That is, while §301(a) expressly provides that distributions made by a corporation to a s hareholder with respect to its stock “shal l be treated in the manner provided in [§301(c)],” under Miller , a distribution from a corporation without ear n ings and profits wou l d fail to be a return of capital for lack of cont emporane ous intent to treat it th at way; but to the extent that distribution did not exceed the taxpayer’s basis for th e stock (an dthus beco me a capital gain), §301(a) would l e ave the di stribution unaccounted for. It is no ans wer to say that §61(a) o f the Code would step in where §301(a) has been pushed out. Al though §61(a) defines gross income, “[e]xcept as otherwise provided,” as “all income from what ever source derived,” t h e plain tex t of §301(a) does provide otherwise for distributions made with respect to stock. So using §6 1(a) as a stopgap would only sanction yet another e ccentricity: §301(a) would be held not to cover what its text says it “shall” (the class of distributions made with resp ect to stock fo r which no other more specific pro vision is made), while §61(a) would need to b e applied to what by its terms it sh ould not b e (a receipt of funds for which tax tr eatment is “otherwise14 BOULWARE v. UNITED STATES Opinion of theCourt 

### provided” i n§301(a)). The impla u sibility of a statutory reading that eithe r creates a ta x limbo or forces resort to an atext ual stopgap is all the clearer from t h e Ninth Circuit’s discu ssion in this case of its own unde r standing of the con s equences of Miller’s rul e : the courtopenly acknowledged that “imposing an inte nt requirement cre ates a disconnect betwe e n civil and cri minal liability,” 470 F. 3d, at 934. In construing distribution rules t hat draw n o distinction in terms of criminal or civil consequences, the disparity of treatment assumed b ythe Court of Appeals counts heavily against its contemporaneous in tent construction (quite apart fro m the Circuit’s understanding that its interpretation entails criminal liability for evasion without any showing of a tax deficiency). Miller erre d in requiring a contemporaneous intent to treat the receipt of cor p orate fund s as a retur nof capital , and the jud g ment of th e Court of Appeals here, relying on Miller , is lik ewise erroneous. IV The Govern ment has raised nothing that call s for affirmance in the face of the Court of Appeals’s reliance on Miller

. The United States does not defend differential treatment o f criminal a n d civil cas e s, see Brief for United States 24, and it thus stops short of fully defending the Ninth Circuit’s treatment. The Government’s argum e nt, instead, is that we sh ould affirm under the rule that b e fore any distribution may be tre ated as a return of capital (or, by a pa rity of reasoning, a dividend), it must first be distributed to the shar eholder “with respect t o . . . stoc k.” Id. , at 19 (internal quotations omitted). The taxpaye r ’s intent, the Government says, m a y be relevant to thi s limiting condition, an d Boulwa re never expr essly claimed any such i n tent. See ibid. (“[I]ntent is .

. . relevant to whether a payment is a ‘distributi o n .
. . with respect to [ a15 Cite as: 55 2 U

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### corporation’s] stock’ ”); but see Tr. of Oral Arg. 44 (“[J]ust to be clear, the Government is arguing for an objective test here”). The Government is of course correct that “wi t h respec t to .

. . stock” is a limiting conditio n in §301(a). See su pr a , at 2–3. 12 

### As the Gover n ment variously says, it requires that “the distribution of property by the corporation be made to a sharehold e r because of his ownership of its stock,” Brief for United States 16 ; and that “ ‘an amoun t paid by a corporation to a shareholder [be] paid to th e shareholder in his capacity as such,’ ” ibid. (quoting 26 CFR §1.301–1(c) (2007) (emphasis deleted)). This, however, is not th e time or place to home in on the “with respe ct to .

. . stock” condition. Facts with a bearing on it may range from the distribution of stock ownership 13

——————

12 Another limiti n g co ndition is that the divers ion of fund s mus t b e a “dis tribution” in the firstpl a c e (regar dless of the “wi t h respect to stock” limit ation), se e supra , at 6–8, thoughthe Gov e r n mentis c o ntent to assu me th at §301( a)’ s “ d is t r ibu t ion” l a n g u a g eis c a p a c i ou s en ou ghto cover t h e divers ions involved here, a n d t h a tif Boulwa re b e a r s the burden of pro d uction in goi n g forw ar d wi th the defense that the funds h e r e c e iv ed c o n s titu ted a “d i s tr ibu t ion” wi th inth e mean in gof §301(a),
see n. 14, inf ra , that burden has been met. Nor does the Gove rnme nt dispute that Boulware offere d suffici ent evidence of his basi s and HIE’s lack of earnings and profits. See Br ief for Un ited St ates 34, n

. 11.

13 See, e. g., Tr u esdell v. Commis s i oner , IR S Non Docke t ed S e rvice Adv i c e Rev i ew, 1989 WL 117 29 52 (M ar . 15, 1989) (“We believ ea c o r p or ationan d its sh ar eh older s have a common obje ctive—to earn a profitfor t h e corpora t ion to pa ss onto i t s shareholders. Especiall y where the co rporation is wh olly owne d by one shareholder, the corpo r ation becomes the alter ego of the share h older in hisprofit making capacity. . . . [B]y pass ing corporate funds to himself as shareholder, a sole sharehold e r is acting inpursui t of the s e c o mmon objec t iv es”). We note, howev e r , thatal thoughBoulwa r ew a s n o t a so le sh ar eh older , th e Tax Court has taken it as “ w ell set t le d th at a distributi on of corporate
ear n ing s to shar eholder s ma yc o nstitu te a dividend,” and so a return o f
c a pitala s wel l , “notwithst a n dingthat it is not in pr opor tion to s t oc kholdings.” Dellingerv. Commis s i oner , 32 T. C. 1178, 11 83 ( 195 9); see ibid . (noting th at because other stockh old e rs did not co mplainwhen a16 BOULWARE v. UNITED STATES Opinion of theCourt 

### to conditions of corpora t e employment (whethe r , for example, a shareholder’s efforts on behalf of a corporatio n amount to a good reas on to treat a payment of property as salary). The facts in this ca se have yet to be raked over with the stock owners hip condition in mind, since Miller seems to have pretermitted a full conside r ation of the defensive p r offer, and if consider ation is to be given to tha t condition n o w, the canvas of evidence andBoulware’s proffer should be made by a court familiar with the whol e evidentiary record. 14 

### As a more specific version of its “with respe ct to . . . stock” position, the Government says that the diversions of corporate funds to Boulware were in fact unlawful, see Brief for United State s 34–37; see also n. 5, supra , an d it argues that §§301 and 316(a) are inapplicable to illegal transfers, see Brief for United States 34– 37; see als o D’A gostino , 145 F. 3d, at 73 (“[T]h e ‘no earnin gs and profits, no income’ rule wo uld not necessarily apply in a case of

—————— taxpayer rece ived unequalproperty , “underthe c i rcumstanc es they must be deemed to have ratified the distri bution”); see also Crowleyv. Com i ssioner , 962 F. 2d 107 7 (CA1 19 92); Lengsfiel dv. Commis s i oner , 241 F. 2d 5 0 8 (CA5 19 57); Ba irdv. Com m i ssion er , 25 T. C. 38 7 (1 95 5); Thielking v. C o m m i ssioner , 53 TCM7 46 ( 198 7), ¶87, 2 2 7 , P–H M e m o TC.

14 Boulware does not di spute that he be ars the burden of producing
some ev iden ce to su ppor t h i s r e tu rn-o f- ca pit a l t h eory, includi n g e vidence that the corporation lacked ea rnings and profits and that he had
su ffic i en t bas i s inh i s stoc k to c o v e r the distribution. See Tr. of Oral Ar g
. 53. He in stead ar g u es th at, as to the “with r e spect to .

. . stoc k”
r e quir ement, i tsuffic e s to show “[t]ha t h e is a stoc kh olde r , an d th at h e did not receive this money in a n y nons toc k holder ca pa city.” Id. , at 57. The Gove rnm e nt, for its part, on the authority of Hollandv. Un i t ed States , 348 U. S. 12 1 ( 195 4) an d Bok , 15 6 F. 3d, at 163

– 164, ar g u es th a t B o u l w a r em u s to f f e rm o r ee v i d e n c et h a nt h a t

. W e e x p r e s s n o v i e wo n that iss u e here, jus tas we decline to cons ider the more g e neral ques tion whet her t h e S e cond Circuit ’ s rule in Bok , which places on the criminal defendant the burden to produce ev idenc ein s u pport of aret u rn-of

c a pital theor y , is authorized by Holland a n d cons is tent with Sandst rom v. Montana , 442 U. S. 510 (1 979), an d r e lat e d c a ses.17 Cite as: 55 2 U

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### unlawful di version, such as embez z lement, theft, a violation of corp orate law, o ran a ttemp t to defraudthirdpar t y creditors” (emphasis in original)); see als o n. 8, supra
. TheGovernment goes so far as to claim that “[t]he only rational basis for the jury’s judgment was a co nclusion that [Boulware] unlawfully divert ed the funds.” Brief for United States 37. But we decline to take up the question whether a n unlawful diversion may ever be deemed a “dis tribution . .

. with respec t to [a corp oration’s] stock,” a qu estion which was not con s idered by the Ninth Ci rcuit. We do, however, reject the Government’s cur r entcharacteri zation of the jury verdic tin Boulwar e ’s case

. Tr ue, the jurors were not moved by Boulware’s suggestio n that the diversions were corporate advances or loans, or that he was using th e funds for co rporate pur p oses. But the jury wa s not asked, and cannot be said to have answered, wheth e r Boulware breached any fiduciary duty as a controlling shareholder, unlawfully diverted corporate f unds to defraud his wife, or embezzled H I E’s funds outright. V Sections §§301 and 31 6(a) governthe tax co nsequences of constructive distributions mad e by a corporation to a shareholder with respect to its stock. A defendant in a criminal tax case does not need t o show a contemporaneous intent to treatdiv e rsions as returns of c a pital before relying on those sect ions to demonstrate no taxes a r e owed. The judgment of the Court of Appeals is vacate d, and the case is remanded for furt her proceedings consistent with th is opinion. It is so orde red.