(Slip Opinion) OCTOBER TERM, 2007 1 

Syllabus 

NOTE: Where it is feasible, a syllabus (headnote) will be released, as is

being done in connection with this case, at the time the opinion is issued.

The syllabus constitutes no part of the opinion of the Court but has been

prepared by the Reporter of Decisions for the convenience of the reader. 

See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337. 

SUPREME COURT OF THE UNITED STATES 

Syllabus 

BOULWARE v. UNITED STATES 

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR 

THE NINTH CIRCUIT 

No. 06–1509. Argued January 8, 2008—Decided March 3, 2008 

One element of tax evasion under 26 U. S. C. §7201 is “the existence of

a tax deficiency.” Sansone v. United States, 380 U. S. 343, 351. Petitioner Boulware was charged with criminal tax evasion and filing a 

false income tax return for diverting funds from a closely held corporation, HIE, of which he was the president, founder, and controlling 

shareholder. To support his argument that the Government could

not establish the tax deficiency required to convict him, Boulware

sought to introduce evidence that HIE had no earnings and profits in

the relevant taxable years, so he in effect received distributions of 

property that were returns of capital, up to his basis in his stock,

which are not taxable, see 26 U. S. C. §§301 and 316(a). Under 

§301(a), unless the Internal Revenue Code requires otherwise, a “distribution of property” “made by a corporation to a shareholder with

respect to its stock shall be treated in the manner provided in 

[§301(c)].” Section 301(c) provides that the portion of the distribution

that is a “dividend,” as defined by §316(a), must be included in the

recipient’s gross income; and the portion that is not a dividend is, depending on the shareholder’s basis for his stock, either a nontaxable

return of capital or a taxable capital gain. Section 316(a) defines “dividend” as a “distribution” out of “earnings and profits.” The District 

Court granted the Government’s in limine motion to bar evidence 

supporting Boulware’s return-of-capital theory, relying on the Ninth 

Circuit’s Miller decision that a diversion of funds in a criminal tax 

evasion case may be deemed a return of capital only if the taxpayer 

or corporation demonstrates that the distributions were intended to

be such a return. The court later found Boulware’s proffer of evidence insufficient under Miller and declined to instruct the jury on 

his theory. In affirming his conviction, the Ninth Circuit held that 
2 BOULWARE v. UNITED STATES 

Syllabus 

Boulware’s proffer was properly rejected under Miller because he offered no proof that the amounts diverted were intended as a return of 

capital when they were made. 

Held: A distributee accused of criminal tax evasion may claim returnof-capital treatment without producing evidence that, when the distribution occurred, either he or the corporation intended a return of 

capital. Pp. 6–17.

(a) Tax classifications like “dividend” and “return of capital” turn 

on a transaction’s “objective economic realities,” not “the particular

form the parties employed.” Frank Lyon Co. v. United States, 435 

U. S. 561, 573. In economic reality, a shareholder’s informal receipt 

of corporate property “may be as effective a means of distributing

profits among stockholders as the formal declaration of a dividend,” 

Palmer v. Commissioner, 302 U. S. 63, 69, or as effective a means of 

returning a shareholder’s capital, see ibid. Economic substance remains the touchstone for characterizing funds that a shareholder diverts before they can be recorded on a corporation’s books. Pp. 6–8.

(b) Miller’s view that a return-of-capital defense requires evidence

of a corresponding contemporaneous intent sits uncomfortably not 

only with the tax law’s economic realism, but also with the particular

wording of §§301 and 316(a). As these sections are written, the tax 

consequences of a corporation’s distribution made with respect to 

stock depend, not on anyone’s purpose to return capital or get it back, 

but on facts wholly independent of intent: whether the corporation 

had earnings and profits, and the amount of the taxpayer’s basis for 

his stock. The Miller court could claim no textual hook for its contemporaneous intent requirement, but argued that it avoided supposed anomalies. The court, however, mistakenly reasoned that applying §§301 and 316(a) in criminal cases unnecessarily emphasizes

the deficiency’s amount while ignoring the willfulness of the intent to 

evade taxes. Willfulness is an element of the crimes because the substantive provisions defining tax evasion and filing a false return expressly require it, see, e.g., §7201. Nothing in §§301 and 316(a) relieves the Government of the burden of proving willfulness or

impedes it from doing so if there is evidence of willfulness. The 

Miller court also erred in finding it troublesome that, without a contemporaneous intent requirement, a shareholder distributee would

be immune from punishment if the corporation had no earnings and

profits but convicted if the corporation did have earning and profits.

An acquittal in the former instance would in fact result merely from

the Government’s failure to prove an element of the crime. The fact 

that a shareholder of a successful corporation may have different tax

liability from a shareholder of a corporation without earnings and

profits merely follows from the way §§301 and 316(a) are written and 
Cite as: 552 U. S. ____ (2008) 3 

Syllabus 

from §7201’s tax deficiency requirement. Even if there were compelling reasons to extend §7201 to cases in which no taxes are owed,

Congress, not the Judiciary, would have to do the rewriting. Pp. 8– 

12. 

(c) Miller also suffers from its own anomalies. First, §§301 and 316

are odd stalks for grafting a contemporaneous intent requirement. 

Correct application of their rules will often become possible only at

the end of the corporation’s tax year, regardless of the shareholder or 

corporation’s understanding months earlier when a particular distribution may have been made. Moreover, §301(a), which expressly 

provides that distributions made with respect to stock “shall be

treated in the manner provided in [§301(c)],” ostensibly provides for 

all variations of tax treatment of such distributions unless a separate

Code provision requires otherwise. Yet Miller effectively converts the 

section into one of merely partial coverage, leaving the tax status of 

one class of distributions in limbo in criminal cases. Allowing §61(a) 

of the Code, which defines gross income, “[e]xcept as otherwise provided,” as “all income from whatever source derived,” to step in where

§301(a) has been pushed aside would sanction yet another eccentricity: §301(a) would not cover what it says it “shall,” (distributions with

respect to stock for which no more specific provision is made), while

§61(a) would have to apply to what by its terms it should not (a receipt of funds for which tax treatment is “otherwise provided” in

§301(a)). Miller erred in requiring contemporaneous intent, and the 

Ninth Circuit’s judgment here, relying on Miller, is likewise erroneous. Pp. 12–14.

(d) This Court declines to address the Government’s argument that

the judgment should be affirmed on the ground that before any distribution may be treated as a return of capital, it must first be distributed to the shareholder “with respect to . . . stock.” The facts in 

this case have not been raked over with that condition in mind, and 

any canvas of evidence and Boulware’s proffer should be made by a

court familiar with the entire evidentiary record. Nor will the Court 

take up in the first instance the question whether an unlawful diversion may ever be deemed a “distribution . . . with respect to [a corporation’s] stock.” Pp. 14–17. 

470 F. 3d 931, vacated and remanded. 

SOUTER, J., delivered the opinion for a unanimous Court. 
_________________ 

_________________ 

Cite as: 552 U. S. ____ (2008) 1 

Opinion of the Court 

NOTICE: This opinion is subject to formal revision before publication in the

preliminary print of the United States Reports. Readers are requested to

notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in order

that corrections may be made before the preliminary print goes to press. 

SUPREME COURT OF THE UNITED STATES 

No. 06–1509 

MICHAEL H. BOULWARE, PETITIONER v.

UNITED STATES

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE NINTH CIRCUIT

[March 3, 2008] 

JUSTICE SOUTER delivered the opinion of the Court. 

Sections 301 and 316(a) of the Internal Revenue Code

set the conditions for treating certain corporate distributions as returns 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 without 

producing evidence that either he or the corporation intended a capital return when the distribution occurred. 

We hold that no such showing is required. 

I 

“[T]he capstone of [the] system of sanctions . . . calculated to induce . . . fulfillment of every duty under the 

income tax law,” Spies v. United States, 317 U. S. 492, 497 

(1943), is 26 U. S. C. §7201, making it a felony willfully to 

“attemp[t] in any manner to evade or defeat any tax imposed by” the Code.1 One element of tax evasion under 

§7201 is “the existence of a tax deficiency,” Sansone v. 

—————— 

1A related provision, 26 U. S. C. §7206(1), criminalizes the willful 

filing of a tax return believed to be materially false. See n. 9, infra. 
2 BOULWARE v. UNITED STATES 

Opinion of the Court 

United States, 380 U. S. 343, 351 (1965); see also Lawn v. 

United States, 355 U. S. 339, 361 (1958),2 which the Government must prove beyond a reasonable doubt, see ibid. 

(“[O]f course, a conviction upon a charge of attempting to 

evade assessment of income taxes by the filing of a fraudulent return cannot stand in the absence of proof of a 

deficiency”).

Any deficiency determination in this case will turn on

§§301 and 316(a) of the Code. According to §301(a), unless 

another provision of the 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), the 

portion of the distribution that is a “dividend,” as defined 

by §316(a), must be included in the recipient’s gross income; and the portion that is not a dividend is, depending 

on the shareholder’s basis for his stock, either a nontaxable return of capital or a gain on the sale or exchange of 

stock, ordinarily taxable to the shareholder as a capital 

gain. Finally, §316(a) defines “dividend” as 

“any distribution of property made by a corporation to 

its shareholders— 

“(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 by reason of any distributions 

made during the taxable year), without regard to the

amount of the earnings and profits at the time the 

—————— 

2 “[T]he elements of §7201 are willfulness[,] the existence of a tax

deficiency, . . . and an affirmative act constituting an evasion or attempted evasion of the tax.” Sansone v. United States, 380 U. S. 343, 

351 (1965). The Courts of Appeals have divided over whether the 

Government must prove the tax deficiency is “substantial,” see United 

States v. Daniels, 387 F. 3d 636, 640–641, and n. 2 (CA7 2004) (collecting cases); we do not address that issue here. 
Cite as: 552 U. S. ____ (2008) 3 

Opinion of the Court 

distribution was made.” 

Sections 301 and 316(a) together thus make the existence

of “earnings and profits”3 the decisive fact in determining 

the tax consequences of distributions from a corporation to 

a shareholder with respect to his stock. This requirement

of “relating the tax status of corporate distributions to 

earnings and profits is responsive to a felt need for protecting returns of capital from tax.” 4 Bittker & Lokken 

¶92.1.1, p. 92–3. 

II 

In this criminal tax proceeding, petitioner Michael 

Boulware was charged with several counts of tax evasion 

and filing a false income tax return, stemming from his

diversion of funds from Hawaiian Isles Enterprises (HIE), 

a closely held corporation of which he was the president,

founder, and controlling (though not sole) shareholder. At 

trial,4 the United States sought to establish that Boulware 

had received taxable income by “systematically divert[ing]

funds from HIE in order to support a lavish lifestyle.” 384 

F. 3d 794, 799 (CA9 2004). The Government’s evidence 

showed that 

—————— 

3Although the Code does not “comprehensively define ‘earnings and 

profits,’ ” 4 B. Bittker & L. Lokken, Federal Taxation of Income, Estates 

and Gifts ¶92.1.3, p.92–6 (3d ed. 2003) (hereinafter Bittker & Lokken), 

the “[p]rovisions of the Code and regulations relating to earnings and

profits ordinarily take taxable income as the point of departure,” id., at 

92–9. 

4The trial at issue in this case was actually Boulware’s second trial 

on §§7201 and 7206(1) charges, his convictions on those counts in an

earlier trial having been vacated by the Ninth Circuit for reasons not at

issue here, see 384 F. 3d 794 (2004). In that earlier trial, Boulware was 

also convicted of conspiracy to make false statements to a federally

insured financial institution, in violation of 18 U. S. C. §371. The Ninth 

Circuit affirmed Boulware’s conspiracy conviction that first time 

around, however, so the present trial did not include a conspiracy

charge. 
4 BOULWARE v. UNITED STATES 

Opinion of the Court 

“[Boulware] gave millions of dollars of HIE money to 

his girlfriend . . . and millions of dollars to his wife . . . 

without reporting any of this money on his personal 

income tax returns. . . . [H]e siphoned off this money 

primarily by writing checks to employees and friends 

and having them return the cash to him, by diverting

payments by HIE customers, by submitting fraudulent invoices to HIE, and by laundering HIE money 

through companies in the Kingdom of Tonga and 

Hong Kong.” Ibid. 

In defense, Boulware sought to introduce evidence that

HIE had no retained or current earnings and profits in the

relevant taxable years, with the consequence (he argued)

that he in effect received distributions of property that

must have been returns of capital, up to his basis in his 

stock. See §301(c)(2). Because the return of capital was

nontaxable, the argument went, the Government could not 

establish the tax deficiency required to convict him. 

The Government moved in limine to bar evidence in 

support of Boulware’s return-of-capital theory, on the 

grounds of “irrelevan[ce] in [this] criminal tax case,” App. 

20. The Government relied on the Ninth Circuit’s decision 

in United States v. Miller, 545 F. 2d 1204 (1976), in which

that court held that in a criminal tax evasion case, a diversion 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 return,” id., at 1215. Boulware, the 

Government argued, had offered to make no such demonstration. App. 21.

The District Court granted the Government’s motion,

and when Boulware sought “to present evidence of [HIE’s] 

alleged over-reporting of income, and an offer of proof 

relating to the issue of . . . dividends,” id., at 135, the 

District Court denied his request. The court said that 
Cite as: 552 U. S. ____ (2008) 5 

Opinion of the Court 

“[n]ot only would much of [his proffered] evidence be excludable as expert legal opinion, it is plainly insufficient 

under the Miller case,” id., at 138, and accordingly declined to instruct the jury on Boulware’s return-of-capital 

theory. The jury rejected his alternative defenses (that 

the diverted funds were nontaxable corporate advances or 

loans, or that he used the moneys for corporate purposes), 

and found him guilty on nine counts, four of tax evasion

and five of filing a false return.

The Ninth Circuit affirmed. 470 F. 3d 931 (2006). It 

acknowledged that “imposing an intent requirement creates a disconnect between civil and criminal liability,” but 

thought that under Miller, “the characterization of diverted corporate funds for civil tax purposes does not 

dictate their characterization for purposes of a criminal

tax evasion charge.” 470 F. 3d, at 934. The court held the 

test in a criminal case to be “whether the defendant has 

willfully attempted to evade the payment or assessment of

a tax.” Ibid. Because Boulware “‘presented no concrete

proof that the amounts were considered, intended, or

recorded on the corporate records as a return of capital at

the time they were made,’” id., at 935 (quoting Miller, 

supra, at 1215), the Ninth Circuit held that Boulware’s 

proffer was “properly rejected . . . as inadequate,” 470

F. 3d, at 935. 

Judge Thomas concurred because the panel was bound 

by Miller, but noted that “Miller—and now the majority 

opinion—hold that a defendant may be criminally sanctioned for tax evasion without owing a penny in taxes to

the government.” 470 F. 3d, at 938. That, he said, not 

only “indicate[s] a logical fallacy, but is in flat contradiction with the tax evasion statute’s requirement . . . of a tax

deficiency.” Ibid. (internal quotation marks omitted).5 

—————— 

5 Judge Thomas went on to say that the Government would prevail

even without Miller’s rule because, in his view, Boulware’s diversions 
6 BOULWARE v. UNITED STATES 

Opinion of the Court 

We granted certiorari, 551 U. S. ___ (2007), to resolve a 

split among the Courts of Appeals over the application of

§§301 and 316(a) to informally transferred or diverted 

corporate funds in criminal tax proceedings.6 We now 

vacate and remand. 

III 

A 

The colorful behavior described in the allegations requires a reminder that tax classifications like “dividend”

and “return of capital” turn on “the objective economic

realities of a transaction rather than . . . the particular 

form the parties employed,” Frank Lyon Co. v. United 

States, 435 U. S. 561, 573 (1978); a “given result at the end 

of a straight path is not made a different result . . . by

following a devious path,” Minnesota Tea Co. v. Helvering, 

302 U. S. 609, 613 (1938).7 As for distributions with re­

—————— 

were “unlawful,” and the return-of-capital rules would not apply to

diversions made for unlawful purposes. See 470 F. 3d, at 938–939. 6As noted, the Ninth Circuit holds that §§301 and 316(a) are not to be 

consulted in a criminal tax evasion case until the defendant produces 

evidence of an intent to treat diverted funds as a return of capital at

the time it was made. See 470 F. 3d 931 (2006) (case below). By

contrast, the Second Circuit allows a criminal defendant to invoke 

§§301 and 316(a) without evidence of a contemporaneous intent to treat

such moneys as returns of capital. See United States v. Bok, 156 F. 3d 

157, 162 (1998) (“[I]n return of capital cases, a taxpayer’s intent is not 

determinative in defining the taxpayer’s conduct”). Meanwhile, the 

Third, Sixth, and Eleventh Circuits arguably have taken the position 

that §§301 and 316(a) are altogether inapplicable in criminal tax cases 

involving informal distributions. See United States v. Williams, 875 

F. 2d 846, 850–852 (CA11 1989); United States v. Goldberg, 330 F. 2d 

30, 38 (CA3 1964); Davis v. United States, 226 F. 2d 331, 334–335 (CA6

1955); but see Brief for Petitioner 16 (“[T]hese cases can be read to 

address the allocation of the burden of proof on the return of capital

issue, rather than the applicable substantive principles”). 7We have also recognized that “[t]he legal right of a taxpayer to decrease the amount of what otherwise would be his taxes, or altogether

avoid them, by means which the law permits, cannot be doubted.” 
Cite as: 552 U. S. ____ (2008) 7 

Opinion of the Court 

spect to stock, in economic reality a shareholder’s informal 

receipt of corporate property “may be as effective a means

of distributing profits among stockholders as the formal 

declaration of a dividend,” Palmer v. Commissioner, 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 subject 

to §301 even though it is not declared in formal fashion.” 

B. Bittker & J. Eustice, Federal Income Taxation of Corporations and Shareholders ¶8.05[1], pp. 8–36 to 8–37 (6th 

ed. 1999) (hereinafter Bittker & Eustice); see also Gardner, The Tax Consequences of Shareholder Diversions in 

Close Corporations, 21 Tax L. Rev. 223, 239 (1966) (hereinafter Gardner) (“Sections 316 and 301 do not require any 

formal path to be taken by a corporation in order for those 

provisions to apply”).

There is no reason to doubt that economic substance 

remains the right touchstone for characterizing funds 

received when a shareholder diverts them before they can

be recorded on the corporation’s books. While they “never 

—————— 

Gregory v. Helvering, 293 U. S. 465, 469 (1935). The rule is a two-way

street: “while a taxpayer is free to organize his affairs as he chooses, 

nevertheless, once having done so, he must accept the tax consequences

of his choice, whether contemplated or not, . . . and may not enjoy the 

benefit of some other route he might have chosen to follow but did not,” 

Commissioner v. National Alfalfa Dehydrating & Milling Co., 417 U. S. 

134, 149 (1974); see also id., at 148 (referring to “the established tax

principle that a transaction is to be given its tax effect in accord with

what actually occurred and not in accord with what might have occurred”); Founders Gen. Corp. v. Hoey, 300 U. S. 268, 275 (1937) (“To

make the taxability of the transaction depend upon the determination 

whether there existed an alternative form which the statute did not tax 

would create burden and uncertainty”). The question here, of course, is

not whether alternative routes may have offered better or worse tax

consequences, see generally Isenbergh, Review: Musings on Form and 

Substance in Taxation, 49 U. Chi. L. Rev. 859 (1982); rather, it is

“whether what was done . . . was the thing which the statute[, here

§§301 and 316(a),] intended,” Gregory, supra, at 469. 
8 BOULWARE v. UNITED STATES 

Opinion of the Court 

even pass through the corporation’s hands,” Bittker & 

Eustice ¶8.05[9], p. 8–51, even diverted funds may be seen 

as dividends or capital distributions for purposes of §§301

and 316(a), see Truesdell v. Commissioner, 89 T. C. 1280 

(1987) (treating diverted funds as “constructive” distributions in civil tax proceedings). The point, again, is that 

“taxation is not so much concerned with the refinements of 

title as it is with actual command over the property 

taxed—the actual benefit for which the tax is paid.” Corliss v. Bowers, 281 U. S. 376, 378 (1930); see also Griffiths 

v. Commissioner, 308 U. S. 355, 358 (1939).8 

B 

Miller’s view that a criminal defendant may not treat a

distribution as a return of capital without evidence of a 

corresponding contemporaneous intent sits uncomfortably

not only with the tax law’s economic realism, but with the 

particular wording of §§301 and 316(a), as well. As those 

sections are written, the tax consequences of a “distribution by a corporation with respect to its stock” depend, not 

on anyone’s purpose to return capital or to get it back, but

on facts wholly independent of intent: whether the corporation had earnings and profits, and the amount of the

taxpayer’s basis for his stock. Cf. Truesdell v. Commissioner, Internal Revenue Service (IRS) Action on Decision 

1988–25, 1988 WL 570761 (Sept. 12, 1988) (recommendation regarding acquiescence); IRS Non Docketed Service 

—————— 

8Thus in the period between this Court’s decisions in Commissioner 

v. Wilcox, 327 U. S. 404 (1946) (holding embezzled funds to be nontaxable to the embezzler) and James v. United States, 366 U. S. 213 (1961) 

(overruling Wilcox, holding embezzled funds to be taxable income), the 

Government routinely argued that diverted funds were “constructive 

distributions,” taxable to the recipient as dividends. See generally

Gardner 237 (“While Wilcox was good law, the safest way to insure that 

both the corporation and the shareholder would be taxed on their 

respective gain from the diverted funds was to label them dividends”); 4

Bittker & Lokken ¶92.2(7), p. 92–23, n. 37. 
Cite as: 552 U. S. ____ (2008) 9 

Opinion of the Court 

Advice Review, 1989 WL 1172952 (Mar. 15, 1989) (reply to 

request for reconsideration) (“[I]ntent is irrelevant. . . .

[E]very distribution made with respect to a shareholder’s 

stock is taxable as ordinary income, capital gain, or not at 

all pursuant to section 301(c) dependent upon the corporation’s earnings and profits and the shareholder’s stock 

basis. The determination is computational and not dependent upon intent”).

 When the Miller court went the other way, needless to

say, it could claim no textual hook for the contemporaneous intent requirement, but argued for it as the way to

avoid two supposed anomalies. First, the court thought

that applying §§301 and 316(a) in criminal cases unnecessarily emphasizes the exact amount of deficiency while 

“completely ignor[ing] one essential element of the crime 

charged: the willful intent to evade taxes . . . .” 545 F. 2d, 

at 1214. But there is an analytical mistake here. Willfulness is an element of the crimes charged because the 

substantive provisions defining tax evasion and filing a

false return expressly require it, see §7201 (“Any person

who willfully attempts . . . ”); §7206(1) (“Willfully makes 

and subscribes . . . ”). The element of willfulness is addressed at trial by requiring the Government to prove it.

Nothing in §§301 and 316(a) as written (that is, without

an intent requirement) relieves the Government of this 

burden of proving willfulness or impedes it from doing so if 

evidence of willfulness is there. Those two sections as 

written simply address a different element 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 tacking an

intent requirement onto the rule distinguishing dividends

from capital returns. 

 Second, the Miller court worried that if a defendant 

could claim capital treatment without showing a corresponding and contemporaneous intent, 
10 BOULWARE v. UNITED STATES 

Opinion of the Court 

“[a] taxpayer who diverted funds from his close corporation when it was in the midst of a financial difficulty and had no earnings and profits would be immune from punishment (to the extent of his basis in

the stock) for failure to report such sums as income; 

while that very same taxpayer would be convicted if

the corporation 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 taxpayer like Boulware could be 

convicted of evasion with no showing of deficiency from an 

unreported dividend or capital gain. 

But the acquittal that the author of Miller called form 

trumping substance would in fact result from the Government’s failure to prove an element of the crime. There 

is no criminal tax evasion without a tax deficiency, see 

supra, at 1–2,9 and there is no deficiency owing to a distri­

—————— 

9Boulware was also convicted of violating §7206(1), which makes it a

felony “[w]illfully [to] mak[e] and subscrib[e] any return, statement, or 

other document, which contains or is verified by a written declaration

that it is made under the penalties of perjury, and which [the taxpayer]

does not believe to be true and correct as to every material matter.” He 

argues that if the Ninth Circuit erred, its error calls into question not 

only his §7201 conviction, but his §7206(1) conviction as well. Brief for 

Petitioner 15–16. Although the Courts of Appeals are unanimous in 

holding that §7206(1) “does not require the prosecution to prove the

existence of a tax deficiency,” United States v. Tarwater, 308 F. 3d 494, 

504 (CA6 2002); see also United States v. Peters, 153 F. 3d 445, 461 

(CA7 1998) (collecting cases), it is arguable that “the nature and character of the funds received can be critical in determining whether . . . 

§7206(1) has been violated, [even if] proof of a tax deficiency is unnecessary,” 1 I. Comisky, L. Feld, & S. Harris, Tax Fraud & Evasion 

¶2.03[5], p. 21 (2007); see also Brief for Petitioner 15–16. The Government does not argue that Boulware’s §§7201 and 7206(1) convictions

should be treated differently at this stage of the proceedings, however, 

and we will accede to the Government’s working assumption here that

the §§7201 and 7206(1) convictions stand or fall together. 
Cite as: 552 U. S. ____ (2008) 11 

Opinion of the Court 

bution (received with respect to a corporation’s stock) if a 

corporation has no earnings and profits and the value 

distributed does not exceed the taxpayer-shareholder’s 

basis for his stock. Thus the fact that a shareholder distributee of a successful corporation may have different tax 

liability from a shareholder of a corporation without earnings and profits merely follows from the way §§301 and 

316(a) are written (to distinguish dividend from capital

return), and from the requirement of tax deficiency for a

§7201 crime. Without the deficiency there is nothing but 

some act expressing the will to evade, and, under §7201,

acting on “bad intentions, alone, [is] not punishable,” 

United States v. D’Agostino, 145 F. 3d 69, 73 (CA2 1998).

It is neither here nor there whether the Miller court was 

justified in thinking it would improve things to convict

more of the evasively inclined by dropping the deficiency

requirement and finding some other device to exempt

returns of capital.10 Even if there were compelling reasons

to extend §7201 to cases in which no taxes are owed, it

bears repeating that “[t]he spirit of the doctrine which

denies to the federal judiciary power to create crimes 

forthrightly admonishes that we should not enlarge the 

reach of enacted crimes by constituting them from anything less than the incriminating components contemplated by the words used in the statute,” Morissette v. 

—————— 

10 “A better [method of exempting returns of capital from taxation]

could no doubt be devised.” 4 Bittker & Lokken ¶92.1.1, p. 92–3; see 

ibid. (suggesting, for example, that “all receipts from a corporation

could be treated as taxable income, and a correction for any resulting 

overtaxation could be made in computing gain or loss when stock is 

sold, exchanged, or becomes worthless”); see also Andrews, “Out of its

Earnings and Profits”: Some Reflections on the Taxation of Dividends,

69 Harv. L. Rev. 1403, 1439 (1956) (criticizing the earnings and profits

concept “[a]s a device for separating income from return of capital,” and 

suggesting that “[d]istributions which ought to be treated as return of

capital [could] be brought within the concept of a partial liquidation by 

special provision”). 
12 BOULWARE v. UNITED STATES 

Opinion of the Court 

United States, 342 U. S. 246, 263 (1952) (opinion for the 

Court by Jackson, J.). If §301, §316(a), or §7201 could 

stand amending, Congress will have to do the rewriting. 

C 

Not only is Miller devoid of the support claimed for it,

but it suffers the demerit of some anomalies of its own. 

First and most obviously, §§301 and 316 are odd stalks for 

grafting a contemporaneous intent requirement, given the

fact that the correct application of their rules will often 

become known only at the end of the corporation’s tax 

year, regardless of the shareholder’s or corporation’s understanding months earlier when a particular distribution

may have been made. Section 316(a)(2) conditions treating a distribution as a constructive dividend by reference

to earnings and profits, and earnings and profits are to be

“computed as of the close of the taxable year . . . without 

regard to the amount of the earnings and profits at the

time the distribution was made.” A corporation may make 

a deliberate distribution to a shareholder, with everyone 

expecting a profitable year and considering the distribution to be a dividend, only to have the shareholder end up 

liable for no tax if the company closes out its tax year

in the red (so long as the shareholder’s basis covers the

distribution); when such facts are clear at the time the 

reporting forms and returns are filed,11 the shareholder 

does not violate §7201 by paying no tax on the moneys

received, intent being beside the point. And since intent to 

make a distribution a taxable one cannot control, it would 

—————— 

11Sometimes these facts are not clear, and in certain circumstances 

a corporation may be required to assume it is profitable. For example, the instructions to IRS Form 1099–DIV provide that when a

corporation is unsure whether it has sufficient earnings and profits 

at the end of the taxable year to cover a distribution to shareholders, 

“the entire payment must be reported as a dividend.” See 

http://www.irs.gov/pub/irs-pdf/i1099div.pdf (as visited Feb. 15, 2008, 

and available in Clerk of Court’s case file). 
Cite as: 552 U. S. ____ (2008) 13 

Opinion of the Court 

be odd to condition nontaxable return-of-capital treatment

on contemporaneous intent, when the statute says nothing 

about intent at all. 

The intent interpretation is strange for another reason, 

too (a reason in some tension with the Ninth Circuit’s

assumption that an unreported distribution without contemporaneous intent to return capital will support a conviction for evasion). The text of §301(a) ostensibly provides for all variations of tax treatment of distributions 

received with respect to a corporation’s stock unless a 

separate provision of the Code requires otherwise. Yet 

Miller effectively converts the section into one of merely 

partial coverage, with the 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 shareholder with respect to its

stock “shall be treated in the manner provided in 

[§301(c)],” under Miller, a distribution from a corporation 

without earnings and profits would fail to be a return of 

capital for lack of contemporaneous intent to treat it that

way; but to the extent that distribution did not exceed the 

taxpayer’s basis for the stock (and thus become a capital 

gain), §301(a) would leave the distribution unaccounted 

for. 

It is no answer to say that §61(a) of the Code would step 

in where §301(a) has been pushed out. Although §61(a) 

defines gross income, “[e]xcept as otherwise provided,” as 

“all income from whatever source derived,” the plain text

of §301(a) does provide otherwise for distributions made

with respect to stock. So using §61(a) as a stopgap would 

only sanction yet another eccentricity: §301(a) would be 

held not to cover what its text says it “shall” (the class of 

distributions made with respect to stock for which no

other more specific provision is made), while §61(a) would 

need to be applied to what by its terms it should not be (a 

receipt of funds for which tax treatment is “otherwise 
14 BOULWARE v. UNITED STATES 

Opinion of the Court 

provided” in §301(a)).

The implausibility of a statutory reading that either

creates a tax limbo or forces resort to an atextual stopgap

is all the clearer from the Ninth Circuit’s discussion in this 

case of its own understanding of the consequences of 

Miller’s rule: the court openly acknowledged that “imposing an intent requirement creates a disconnect between 

civil and criminal liability,” 470 F. 3d, at 934. In construing distribution rules that draw no distinction in terms of 

criminal or civil consequences, the disparity of treatment

assumed by the Court of Appeals counts heavily against 

its contemporaneous intent construction (quite apart from

the Circuit’s understanding that its interpretation entails

criminal liability for evasion without any showing of a tax 

deficiency). 

Miller erred in requiring a contemporaneous intent to

treat the receipt of corporate funds as a return of capital,

and the judgment of the Court of Appeals here, relying on 

Miller, is likewise erroneous. 

IV 

The Government has raised nothing that calls for affirmance in the face of the Court of Appeals’s reliance on 

Miller. The United States does not defend differential 

treatment of criminal and civil cases, see Brief for United 

States 24, and it thus stops short of fully defending the

Ninth Circuit’s treatment. The Government’s argument,

instead, is that we should affirm under the rule that before any distribution may be treated as a return of capital 

(or, by a parity of reasoning, a dividend), it must first be

distributed to the shareholder “with respect to . . . stock.” 

Id., at 19 (internal quotations omitted). The taxpayer’s 

intent, the Government says, may be relevant to this

limiting condition, and Boulware never expressly claimed 

any such intent. See ibid. (“[I]ntent is . . . relevant to 

whether a payment is a ‘distribution . . . with respect to [a 
Cite as: 552 U. S. ____ (2008) 15 

Opinion of the Court 

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 “with respect

to . . . stock” is a limiting condition in §301(a). See supra, 

at 2–3.12 As the Government variously says, it requires 

that “the distribution of property by the corporation be

made to a shareholder because of his ownership of its

stock,” Brief for United States 16; and that “‘an amount 

paid by a corporation to a shareholder [be] paid to the 

shareholder in his capacity as such,’” ibid. (quoting 26 

CFR §1.301–1(c) (2007) (emphasis deleted)). 

This, however, is not the time or place to home in on the

“with respect to . . . stock” condition. Facts with a bearing

on it may range from the distribution of stock ownership13 

—————— 

12Another limiting condition is that the diversion of funds must be a 

“distribution” in the first place (regardless of the “with respect to stock” 

limitation), see supra, at 6–8, though the Government is content to

assume that §301(a)’s “distribution” language is capacious enough to 

cover the diversions involved here, and that if Boulware bears the 

burden of production in going forward with the defense that the funds 

he received constituted a “distribution” within the meaning of §301(a),

see n. 14, infra, that burden has been met. Nor does the Government 

dispute that Boulware offered sufficient evidence of his basis and HIE’s 

lack of earnings and profits. See Brief for United States 34, n. 11. 13See, e.g., Truesdell v. Commissioner, IRS Non Docketed Service 

Advice Review, 1989 WL 1172952 (Mar. 15, 1989) (“We believe a 

corporation and its shareholders have a common objective—to earn a 

profit for the corporation to pass onto its shareholders. Especially

where the corporation is wholly owned by one shareholder, the corporation becomes the alter ego of the shareholder in his profit making

capacity. . . . [B]y passing corporate funds to himself as shareholder, a 

sole shareholder is acting in pursuit of these common objectives”). We 

note, however, that although Boulware was not a sole shareholder, the 

Tax Court has taken it as “well settled that a distribution of corporate 

earnings to shareholders may constitute a dividend,” and so a return of

capital as well, “notwithstanding that it is not in proportion to stockholdings.” Dellinger v. Commissioner, 32 T. C. 1178, 1183 (1959); see 

ibid. (noting that because other stockholders did not complain when a 
16 BOULWARE v. UNITED STATES 

Opinion of the Court 

to conditions of corporate employment (whether, for example, a shareholder’s efforts on behalf of a corporation

amount to a good reason to treat a payment of property as

salary). The facts in this case have yet to be raked over 

with the stock ownership condition in mind, since Miller 

seems to have pretermitted a full consideration of the 

defensive proffer, and if consideration is to be given to that

condition now, the canvas of evidence and Boulware’s 

proffer should be made by a court familiar with the whole

evidentiary record.14 

As a more specific version of its “with respect to . . .

stock” position, the Government says that the diversions of

corporate funds to Boulware were in fact unlawful, see

Brief for United States 34–37; see also n. 5, supra, and it 

argues that §§301 and 316(a) are inapplicable to illegal 

transfers, see Brief for United States 34–37; see also 

D’Agostino, 145 F. 3d, at 73 (“[T]he ‘no earnings and profits, no income’ rule would not necessarily apply in a case of 

—————— 

taxpayer received unequal property, “under the circumstances they

must be deemed to have ratified the distribution”); see also Crowley v. 

Comissioner, 962 F. 2d 1077 (CA1 1992); Lengsfield v. Commissioner, 

241 F. 2d 508 (CA5 1957); Baird v. Commissioner, 25 T. C. 387 (1955); 

Thielking v. Commissioner, 53 TCM 746 (1987), ¶87, 227, P–H Memo 

TC. 14Boulware does not dispute that he bears the burden of producing

some evidence to support his return-of-capital theory, including evidence that the corporation lacked earnings and profits and that he had

sufficient basis in his stock to cover the distribution. See Tr. of Oral 

Arg. 53. He instead argues that, as to the “with respect to . . . stock”

requirement, it suffices to show “[t]hat he is a stockholder, and that he

did not receive this money in any nonstockholder capacity.” Id., at 57. 

The Government, for its part, on the authority of Holland v. United 

States, 348 U. S. 121 (1954) and Bok, 156 F. 3d, at 163–164, argues that

Boulware must offer more evidence than that. We express no view on

that issue here, just as we decline to consider the more general question

whether the Second Circuit’s rule in Bok, which places on the criminal

defendant the burden to produce evidence in support of a return-ofcapital theory, is authorized by Holland and consistent with Sandstrom 

v. Montana, 442 U. S. 510 (1979), and related cases. 
Cite as: 552 U. S. ____ (2008) 17 

Opinion of the Court 

unlawful diversion, such as embezzlement, theft, a violation of corporate law, or an attempt to defraud third party

creditors” (emphasis in original)); see also n. 8, supra. The 

Government goes so far as to claim that “[t]he only rational basis for the jury’s judgment was a conclusion that 

[Boulware] unlawfully diverted the funds.” Brief for 

United States 37. 

But we decline to take up the question whether an

unlawful diversion may ever be deemed a “distribution . . .

with respect to [a corporation’s] stock,” a question which

was not considered by the Ninth Circuit. We do, however, 

reject the Government’s current characterization of the 

jury verdict in Boulware’s case. True, the jurors were not

moved by Boulware’s suggestion that the diversions were

corporate advances or loans, or that he was using the

funds for corporate purposes. But the jury was not asked,

and cannot be said to have answered, whether Boulware 

breached any fiduciary duty as a controlling shareholder,

unlawfully diverted corporate funds to defraud his wife, or 

embezzled HIE’s funds outright. 

V 

Sections §§301 and 316(a) govern the tax consequences

of constructive distributions made by a corporation to a

shareholder with respect to its stock. A defendant in a 

criminal tax case does not need to show a contemporaneous intent to treat diversions as returns of capital before

relying on those sections to demonstrate no taxes are 

owed. The judgment of the Court of Appeals is vacated, 

and the case is remanded for further proceedings consistent with this opinion. 

It is so ordered.