In the

United States Court of Appeals

For the Seventh Circuit

____________

Nos. 01-2302 and 01-3414

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

LEONARD CHAVIN and MARTIN LITWIN,

Defendants-Appellants.

____________

Appeals from the United States District Court

for the Northern District of Illinois, Eastern Division. 

No. 99 CR 282—Rebecca R. Pallmeyer, Judge.

____________

ARGUED SEPTEMBER 9, 2002—DECIDED DECEMBER 13, 2002

____________

Before EASTERBROOK, KANNE, and EVANS, Circuit Judges.

KANNE, Circuit Judge. On July 22, 1998, this court

affirmed the district court’s decision to deny Leonard

Chavin a discharge in bankruptcy. In re Chavin, 150 F.3d

726, 729 (7th Cir. 1998). In our opinion, we noted an appearance of deliberate fraud in Chavin’s bankruptcy filings.

Accordingly, we referred the case to the Department of

Justice for further investigation. Id. Eventually, a grand

jury returned a fifteen-count superseding indictment charging Chavin and his attorney, Martin Litwin, with tax and

bankruptcy fraud. Following a lengthy trial, a jury found

them guilty on eleven of the fifteen counts, and the district
2 Nos. 01-2302 & 01-3414

1 Chavin’s daughter, Shari Chavin Vass, was actually listed as

the owner of SCV in the Illinois Department of Revenue filings,

but the record clearly shows that Chavin ran and controlled the

company and his daughter had virtually no connection to it.

2 Chavin, with the help of Litwin, structured the sale of the Halsted property to make it appear that the purchase price was only

$675,000, rather than $975,000; thus, in calculating his capital

gain on his 1992 tax return Chavin used $675,000 as the sale

price. At trial, the jury found that Chavin had underreported the

sale price by $300,000 and thus that he had underreported his

capital gain by that same amount. This finding is not challenged

on appeal.

court sentenced Chavin to 37 months in prison and Litwin

to 33 months in prison. On appeal, they raise multiple issues, including various claims related to the district court’s

application of the federal sentencing guidelines. We reject

all of Chavin’s and Litwin’s arguments and affirm the district court’s disposition.

I. History

A. Tax Fraud

Leonard Chavin, a businessman and investor, owned a

block of commercial real estate on South Halsted in Chicago

(“the Halsted property”). He also controlled a corporation

known as SCV Corporation (“SCV”), which held as its only

asset a clothing store that did business under the name of

Howard’s Style Shop (“HSS”).1

 The business struggled, and

over a period of years Chavin personally lent SCV in excess

of $900,000. In 1992, Chavin sold part of the Halsted

property for $975,000, generating a substantial capital gain

and greatly increasing his tax burden.2

 Chavin and his

attorney, Litwin, devised a plan to offset the Halsted-property gain with the SCV-debt loss.
Nos. 01-2302 & 01-3414 3

They discovered that the tax code allows an individual to

take a deduction for worthless, unrecoverable debts, known

as a “bad debt loss.” 26 U.S.C. § 166(d) (2002). The only

problem was that they had to somehow make the SCV debt

worthless to Chavin. They did so by manufacturing a sham

sale of SCV’s only asset, the HSS clothing store, to Litwin’s

cousin, Michael Glickman. Glickman paid nothing out of

his own pocket for HSS. He was told that the sale was

nothing more than a “paper transaction”—meaning he

would have no connection with the clothing store except

that on paper he would be listed as the owner. Following

the “sale,” Chavin continued to control HSS and nothing

about the business changed. And because SCV no longer

had any assets of record, Chavin could claim that the debt

SCV owed him was entirely worthless and thereby claim it

as a bad debt loss. On his 1992 tax return, Chavin reported

a capital gain from the sale of the Halsted property of

$328,000. Against this, Chavin deducted $900,000 as a bad

debt loss based on the SCV debt. In 1992, Chavin could only

take the loss to the extent that it offset the capital gain

from the Halsted-property sale plus $3000—in total

$331,000; thus, he carried over the remaining portions of

the loss on his returns for subsequent years.

After being alerted to possible fraud in Chavin’s financial

dealings, the government investigated and a federal grand

jury returned a fifteen-count superseding indictment. The

first six counts of the indictment related to the tax dealings

just described. Count 1 charged Chavin and Litwin with

conspiring to defraud the Internal Revenue Service (“IRS”)

through the creation of a fraudulent $900,000 bad debt

loss in violation of 18 U.S.C. § 371. Count 2 charged Chavin

with violating 26 U.S.C. § 7206(1) by making false statements on his 1992 tax return, in that he understated the

sale price of the Halsted property and in that he claimed a

$900,000 bad debt loss to which he knew he was not

entitled. Counts 3 and 5 charged Chavin with making false
4 Nos. 01-2302 & 01-3414

3 Count 7 also charged Glickman with committing perjury during

the bankruptcy proceedings, but Glickman pled guilty to the

charge prior to trial.

statements on his 1993 and 1994 tax returns, respectively,

in that he reported a false carryover loss from his 1992

return in violation of 26 U.S.C. § 7206(1). Similarly, Counts

4 and 6 charged Litwin with violating 26 U.S.C. § 7206(2)

for aiding and assisting Chavin in the preparation and

presentation of his 1993 and 1994 fraudulent tax returns.

Following a trial, the jury convicted Chavin and Litwin on

all of these tax counts.

B. Bankruptcy Fraud

The remaining charges in the superseding indictment,

Counts 7 through 15, related to a bankruptcy fraud that

developed when Chavin’s creditors forced him into bankruptcy on December 30, 1994. As part of the bankruptcy

proceeding, Chavin was required to file schedules disclosing

all of his assets, income, and expenses. On the schedules he

filed, he failed to disclose certain assets and income, including the interest he had in HSS. Also, as part of the

bankruptcy proceeding, Glickman was deposed about his

purported ownership of HSS. Litwin counseled Glickman on

his responses so as to make it appear that Glickman owned

HSS and that Chavin had no interest in the company.

The relevant portion of Count 7 charged Litwin with

violating 18 U.S.C. § 1623 for aiding Glickman to commit

perjury in the bankruptcy proceedings.3

 Litwin was found

guilty on this count. Counts 8 through 13 charged Chavin

with concealing various assets from the bankruptcy trustee

and his creditors in violation of 18 U.S.C. § 152(1). Of these

counts, the jury convicted Chavin on Counts 10 and 11,

which both related to life insurance polices. Chavin was
Nos. 01-2302 & 01-3414 5

convicted on Count 14, which charged him with failing to

disclose assets on his bankruptcy filings in violation of 18

U.S.C. § 152(3). Finally, the jury convicted Chavin on Count

15, which charged him with converting an asset in bankruptcy in violation of 18 U.S.C. § 152(7).

C. The Sentencing and Appeal

Following a sentencing hearing, the district court determined that the appropriate sentencing level under the U.S.

Sentencing Guidelines was 19 for both defendants, which

corresponds to a sentencing range between 30 and 37

months. The district court sentenced Chavin to 37 months

imprisonment and fined him $10,000 and sentenced Litwin

to 33 months imprisonment and fined him $50,000. 

II. Analysis

A. Trial Issues

1. Theory-of-Defense Jury Instruction

Chavin and Litwin argued as part of their defense to the

tax-fraud charges that they relied in good faith on the advice of Chavin’s accountant Kessler and therefore did not

“willfully” perpetrate the tax fraud. Defendants tendered a

theory-of-defense jury instruction that covered this point.

The district court, however, refused to give the instruction

to the jury, stating that the theory of defense was sufficiently covered by other instructions; specifically, by the

pattern instruction on good faith and a further instruction

that made clear that defendants must have acted “willfully”

within the precise definition of that term.

We review a district court’s refusal to give a theory-ofdefense instruction de novo. United States v. Meyer, 157

F.3d 1067, 1074 (7th Cir. 1998). To be entitled to a theory
6 Nos. 01-2302 & 01-3414

of defense instruction, a defendant must satisfy a four-part

test by showing (1) that the proposed instruction is a correct statement of law; (2) that the evidence in the case

supports the theory of defense; (3) that the theory of defense is not already part of the charge; and (4) that failure

to include the proposed instruction would deny the defendant a fair trial. Id. 

Here, defendants have, at the very least, failed to satisfy

the third element. We have recognized in prior tax-evasion

cases that a “ ‘good faith reliance’ defense is essentially a

claim that the [defendant] did not act ‘willfully.’ ” United

States v. Brimberry, 961 F.2d 1286, 1291 (7th Cir. 1992).

Consequently, when, as here, instructions are given that

require the jury to find that a defendant acted “willfully”

and those instructions define “willfulness” and “good faith”

as mutually exclusive, then a further “good faith reliance”

theory-of-defense instruction would be unnecessarily redundant. Id.; United States v. Kelley, 864 F.2d 569, 573 (7th

Cir. 1989). Therefore, we find that the instructions given by

the district court adequately covered the defendants’ theory

of defense.

2. Jury Instruction on Chavin’s Signing of His Tax

Return

Chavin further argues on appeal that the instruction the

district court gave about the effect of his signature on his

1992 tax return could likely have led the jury to believe

that his signature alone overrode his “reliance on a tax

professional” defense. Chavin offered an alternative instruction based on language from United States v. White,

879 F.2d 1509, 1511 (7th Cir. 1989). Ultimately, the district

court rejected this instruction and instead used an instruction based on other language from the White opinion—language that was later cited with approval in United States

v. Ellis, 50 F.3d 419, 425 (7th Cir. 1995). Both instructions
Nos. 01-2302 & 01-3414 7

were accurate statements of the law and did not substantially differ from one another. In this situation, we review

a district court’s decision on the precise wording of the

instruction for abuse of discretion. Riemer v. Ill. Dep’t of

Transp., 148 F.3d 800, 804 (7th Cir. 1998). The instruction

given plainly stated that the determination of whether

Chavin acted knowingly should be based on the “totality of

the circumstances, including but not limited to the bare fact

of the defendant’s signature on various documents.” (Tr.

2787) (emphasis added). We find that it was not an abuse

of discretion for the district court to conclude that this

language would not mislead the jury into thinking that

Chavin’s signature alone defeated his “reliance on a tax

professional” defense.

3. Restriction of Direct Examination of Defense

Expert Sharps

At trial, Chavin sought to have defense expert Jason

Sharps testify during direct examination that Chavin’s accountant, Kessler, had made various “mistakes” on Chavin’s tax return. The district court permitted inquiry into

the ways that Sharps would have prepared the return

differently; however, the court did not allow Sharps to testify that where he and Kessler differed, Kessler had made

a “mistake.” We review a district court’s evidentiary rulings

for abuse of discretion. United States v. Smith, 230 F.3d

300, 307 (7th Cir. 2000). Chavin argues that the testimony

that Kessler had made mistakes was relevant to the issue

of whether Chavin relied on his accountant to prepare

correct income tax returns and to the calculation of tax loss.

We do not perceive how this evidence could be relevant to

either of these issues, and Chavin provides no explanation

as to why it is relevant. Therefore, we find that the district

court did not abuse its discretion in refusing to allow this

evidence.
8 Nos. 01-2302 & 01-3414

4. Litwin’s Motion to Serve as Co-Counsel

Before trial, defendant Litwin, an attorney specializing in

tax, real estate, and bankruptcy law, filed a motion to serve

as co-counsel in his defense. The district court denied the

motion, and Litwin raises the issue again on appeal.

There is no question that a defendant has a constitutional

right to conduct his own defense. But seeking to serve as cocounsel in a “hybrid representation” is a separate question.

United States v. Oakey, 853 F.2d 551, 553 (7th Cir. 1988).

We recognize, along with all other circuits that have considered the question, that there is no Sixth Amendment

right to hybrid representation; rather, whether a defendant

may act as co-counsel along with his own attorney, is a

matter within the discretion of the district court. United

States v. Tutino, 883 F.2d 1125, 1141 (2d Cir. 1989) (“The

decision to grant or deny ‘hybrid representation’ lies solely

within the discretion of the trial court.”); United States v.

Norris, 780 F.2d 1207, 1211 (5th Cir. 1986) (“[A] defendant

does not have the right to a hybrid representation, in which

he conducts a portion of the trial and counsel conducts the

balance.”); United States v. Halbert, 640 F.2d 1000, 1009

(9th Cir. 1981) (“A criminal defendant does not have an

absolute right to both self-representation and the assistance of counsel.”); see also United States v. Singleton, 107

F.3d 1091, 1101 n.7 (4th Cir. 1997) (“The cases reiterating

the principle that courts are not required to allow defendants to split the responsibilities of the representation with

an attorney are myriad.”).

This court has held that hybrid representation is “disfavored.” United States v. Kosmel, 272 F.3d 501, 506 (7th

Cir. 2001); Cain v. Peters, 972 F.2d 748, 750 (7th Cir. 1992);

United States v. Oakey, 853 F.2d 551, 553 (7th Cir. 1988).

The primary reason we have expressed concern about

hybrid representation is because “it allows a defendant to

address the jury, in his capacity as counsel, without being
Nos. 01-2302 & 01-3414 9

cross-examined, in his capacity as a defendant.” Oakey, 853

F.2d at 553. Litwin contends that his assurances, given

before trial, that he would testify if permitted to serve as

co-counsel neutralized the potential problems with hybrid

representation. This sort of pre-trial promise, however, does

not fully allay the concerns. If, after the trial began, he

were to go back on his promise and decide not to testify,

there would be no effective way for the trial court then to

compel him to take the stand. Consequently, his promise is

without effect. Further, the fact that Litwin is an attorney

with experience in the matters involved in this case does

not in any way ease concerns that he could make unsworn

statements to the jury without being subject to crossexamination. Therefore, we find that the district court

properly refused to allow Litwin to serve as co-counsel in

his defense.

5. Sufficiency of Evidence: Glickman’s Testimony

Litwin challenges two aspects of the verdict against him

on grounds of insufficient evidence; the first is whether the

testimony of his cousin was sufficient to convict him. We

will reverse based on insufficiency of evidence only if, viewing the evidence in the light most favorable to the government, the record contains no evidence from which the jury

could find guilt beyond a reasonable doubt. United States v.

Combs, 222 F.3d 353, 362 (7th Cir. 2000).

Litwin argued in a motion for a judgment of acquittal

that the testimony of his cousin, Michael Glickman, was

inherently incredible. The district court denied the motion

and we affirm. As we have stated in previous cases, “it is

not the role of the appellate court to question the jury’s

credibility determinations.” United States v. Stott, 245 F.3d

890, 898 (7th Cir. 2001); see also United States v. Durham,

211 F.3d 437, 445 (7th Cir. 2000); United States v. Alcantar,

83 F.3d 185, 189 (7th Cir. 1996). Therefore, we will reverse
10 Nos. 01-2302 & 01-3414

a jury verdict only if the testimony was incredible as a

matter of law. Stott, 245 F.3d at 898. Litwin points primarily to evidence that Glickman had previously lied to or

cheated various people, including his own family members.

We do not find that this evidence, or any of the other evidence that Litwin has put before us, meets his substantial

burden of showing that Glickman’s testimony was incredible as a matter of law.

6. Sufficiency of Evidence: Conviction on Counts

4 and 6

Counts 4 and 6 of the indictment charged Litwin with

assisting Chavin in the presentation of fraudulent tax returns for 1993 and 1994—the years in which Chavin carried

over the fraudulent bad debt loss. Litwin contends that the

guilty verdict on these counts must be reversed because he

did not aid Chavin in the preparation of these returns, nor,

he claims, was it foreseeable to him that Chavin would

make false statements on these returns. We disagree. Litwin knew that Chavin would have a large bad-debt loss in

1992 because he had helped Chavin create the loss. And

based on Litwin’s experience in tax matters, it was reasonable for the jury to conclude that he would have known that

the entire loss could not have been deducted in 1992—that

some of it would have to be carried over to subsequent

years. Therefore, we find that there was sufficient evidence

to support his conviction on Counts 4 and 6.

B. Sentencing Issues

Chavin and Litwin also challenge various aspects of their

sentences. We review a sentencing court’s factual determinations for clear error and interpretations of the guidelines

de novo. United States v. Owolabi, 69 F.3d 156, 162 (7th

Cir. 1995).
Nos. 01-2302 & 01-3414 11

1. Grouping as to Chavin

Chavin challenges the district court’s refusal to group the

tax and bankruptcy counts together as closely related under

§ 3D1.2(d) of the sentencing guidelines. Had the district

court grouped these counts, Chavin would have received a

lower sentence. Guideline § 3D1.2 provides:

All counts involving substantially the same harm shall

be grouped together into a single Group. Counts involve

substantially the same harm within the meaning of this

rule:

. . . 

(d) When the offense level is determined largely on the

basis of the total amount of harm or loss, the quantity

of a substance involved, or some other measure of aggregate harm, or if the offense behavior is ongoing or

continuous in nature and the offense guideline is written to cover such behavior.

Offenses covered by the following guidelines are to be

grouped under this subsection:

[Several guideline provisions then are listed, including

§ 2F1.1 and § 2T1.1, the offenses for which Chavin was

convicted.] 

U.S. Sentencing Guidelines Manual (“U.S.S.G.”) § 3D1.2

(2000). 

Chavin first contends that since he was convicted of

offenses listed in the “to be grouped” category the district

court had no choice but to group the offenses because

listed offenses must be grouped automatically. Because

such a conclusion flies in the face of the overriding purpose

of § 3D1.2, we disagree, and as we note below, we are not

alone in this determination. See, e.g., United States v.

Williams, 154 F.3d 655, 657 (6th Cir. 1998) (“The bulk of

the courts to have considered the proper construction of
12 Nos. 01-2302 & 01-3414

subsection (d) have concluded that there is no automatic

grouping of counts simply because those counts are on the

‘are to be grouped’ list.”). 

In United States v. Wilson, we noted that the primary goal

of § 3D1.2 “is to combine offenses involving closely related

counts.” 98 F.3d 281, 282 (7th Cir. 1996) (quotations

omitted). In cases, like this one, where two different offense

guidelines are at issue, automatic grouping would often

lead to the grouping of entirely unrelated counts. See

United States v. Harper, 972 F.2d 321, 322 (11th Cir. 1992)

(“In some circumstances, automatic grouping detracts from

the main purpose of section 3D1.2: to combine offenses

involving closely related counts.”). In light of the purpose

of § 3D1.2, we seriously doubt that its drafters would

have desired such an outcome. In fact, the commentary to

§ 3D1.2 makes it clear that they did not: “[c]ounts involving offenses to which different offense guidelines apply are

grouped together under subsection (d) if the offenses are

of the same general type and otherwise meet the criteria

for grouping under this subsection.” U.S.S.G. § 3D1.2 cmt.

n.6 (emphasis added). Consequently, at least in cases

where different offense guidelines apply—as is the case

here, where the offenses are under § 2F1.1 and § 2T1.1—

grouping is not automatic; rather the sentencing court

is required to make an additional inquiry into whether

the offenses are “of the same general type.”

In support of his argument for automatic grouping,

Chavin points to cases in the Second and Ninth Circuits

that hold that grouping is required when offenses are listed

on subsection (d)’s “to be grouped” list. We see an important

distinction, however, between those cases and the case

before us. In both of those cases, the defendants sought to

have charges grouped that were covered by the same

offense guideline. United States v. Gelzer, 50 F.3d 1133,

1144-45 (2d Cir. 1995) (counts that the court held were re-
Nos. 01-2302 & 01-3414 13

4 We should note that we do not today adopt in this circuit the

interpretations put forth in the Second and Ninth Circuits that

grouping is automatic when the counts involved are covered by

the same offense guideline. We simply note that Chavin’s case is

distinguishable from those decisions on that basis.

quired to be grouped were possession of a firearm with an

obliterated serial number and possession of a firearm by

a felon, both offenses to which § 2K2.1 applied); United

States v. Buenrostro-Torres, 24 F.3d 1173, 1176 (9th Cir.

1994) (“If the offenses at issue are covered by one of the

listed guidelines we do not analyze the facts of the particular case. Here, the offenses . . . are covered by § 2F1.1.”)

(emphasis added). Consequently, the courts in those cases

did not need to consider the commentary language about

situations where the offenses at issue are covered by different offense guidelines.4

In fact, when the Second Circuit was faced with the issue

of whether to group counts that were covered by different

guidelines—§ 2F1.1 (fraud) and § 2S1.1 (money laundering), both of which were on the “to be grouped” list—they

did not find that automatic grouping was appropriate,

stating instead that the two counts “should only be grouped

if the counts are also of the same general type.” United

States v. Napoli, 179 F.3d 1, 10 (2d Cir. 1999). Ultimately,

the court found that the two offenses involved there should

not be grouped. Id. at 10-11. Therefore, the Second Circuit

clearly does not view that grouping is always automatic

simply because the offenses are listed. The Second Circuit

is not alone in this finding. At least four other circuits have

reached the same conclusion. See Williams, 154 F.3d at 657

(noting that the courts that have considered the proper

construction of subsection (d) have held that there is no

automatic grouping); United States v. Walker, 112 F.3d 163,

166-67 (4th Cir. 1997) (stating that when considering

whether to group mail fraud (§ 2F1.1) and money launder-
14 Nos. 01-2302 & 01-3414

ing (§ 2S1.1) “[s]ubsection (d) expressly permits the grouping of offenses under the fraud and money laundering

guidelines, but any grouped offenses must be ‘closely

related’ ”); United States v. Seligsohn, 981 F.2d 1418, 1425

(3d Cir. 1992) (“[A]lthough all of the counts are listed in

subsection (d) as appropriate for grouping, that inclusion

does not mean that the counts must be grouped. Counts

must be of the ‘same general type’ before grouping is appropriate.”) (citations omitted); United States v. Harper, 972

F.2d 321, 322 (11th Cir. 1992) (“[G]rouping is not automatic, even if all offenses in question are encompassed

within this [‘to be grouped’] category.”). We join these circuits in finding that grouping under subsection (d) is not

automatic simply because the offenses at issue are listed on

the “to be grouped” list. 

Although we reject automatic grouping, the counts in

Chavin’s case could still be grouped if the offenses are “of

the same general type and otherwise meet the criteria for

grouping under . . . subsection [(d)].” U.S.S.G. § 3D1.2 cmt.

n.6. Chavin’s offenses, however, are not “of the same general type.” We agree with the district court’s reasoning as

to why the tax and bankruptcy counts are not of the same

general type:

[T]he victims are different, and the time frame and

context do not completely overlap. Mr. Chavin’s effort

to cheat his creditors simply does not involve “substantially the same harm” as does his effort to cheat the

government.

(R.173.)

Defendants argue at some length that the district court

erred because it based its finding that the offenses were not

of the same type partially on the fact that the victim of

the bankruptcy fraud was different from the victim of the

tax evasion. According to Chavin, while identity of victims

is required for application of subsections (a) and (b) of
Nos. 01-2302 & 01-3414 15

5 We recognize that Chavin was convicted of tax fraud for his

later tax returns as well but clearly these were only spin-offs

of the original fraud that occurred in 1992.

§ 3D1.2, it is irrelevant to subsections (c) and (d). While we

agree that identity of victims is not required for grouping

under subsection (c) or (d), the notion that identity of victims is irrelevant is in conflict with precedent in this circuit

and with the guideline commentary. In United States v.

Wilson, in considering whether to group two counts under

subsection (d), we stated “[w]hether the offenses involve

different victims is, as the background commentary notes,

‘a primary consideration’ in the grouping decision.” 98 F.3d

at 283 (citing U.S.S.G. § 3D1.2 cmt. background). In fact,

our decision to group the two offenses involved in Wilson

was based largely on the fact that the victim was essentially

the same. Id. at 283 (rejecting an argument that mail fraud

and money laundering involve different victims in favor of

a more intuitive argument that the victims are in reality

the same). Consequently, the district court properly considered the fact that the victim of the tax fraud was the

United States government and the victims of the bankruptcy fraud were Chavin’s creditors as a factor in determining whether these offenses were of the same general

type.

Even aside from there being different victims involved,

there are other considerations that lead us to the conclusion

that Chavin’s crimes are not of the same general type. The

tax and bankruptcy frauds were not “part of a single

continuous course of criminal activity.” United States v.

Petrillo, 237 F.3d 119, 125 (2d Cir. 2000). Indeed, the two

offenses are quite separate. The core of Chavin’s tax fraud

was committed in 1992 when he made the sham sale to

Glickman and filed his fraudulent tax return for that year.5

The core of the bankruptcy fraud did not occur until De-
16 Nos. 01-2302 & 01-3414

cember 1994. Further, the bankruptcy was not even initiated by Chavin, but rather by his creditors, so the idea

that it was part of his criminal plan seems implausible.

Also, as the government notes in its brief, the harms

involved in these offenses were quite different: “the financial loss to bankruptcy creditors is not ‘of the same general

type’ as the harm implicated by a tax offense, which is a

crime against the polity and which has indirect effects on

all taxpayers and on the government’s ability to protect and

serve the public at large.” (Gov. Brief at 37.) Finally, as the

district court correctly noted at the sentencing hearing, the

only real connection between the bankruptcy fraud and tax

fraud appears to be the testimony offered by Glickman in

the bankruptcy proceedings. Even construing “of the same

general type” broadly, as the application notes suggest we

should, we do not find that this minimal connection between the offenses requires grouping in this case. U.S.S.G.

§ 3D1.2 cmt. n.6.

2. Grouping as to Litwin

Litwin argues that the district court erred by not grouping the aiding and abetting perjury count with the tax

evasion charges against him. We agree with the district

court and reject Litwin’s claim. Litwin bases his argument

on § 3D1.2(c), which provides that counts involve substantially the same harm “[w]hen one of the counts embodies

conduct that is treated as a specific offense characteristic

in, or other adjustment to, the guidelines applicable to

another of the counts.” U.S.S.G. § 3D1.2(c). Litwin’s sentence on the tax offense was enhanced two levels for sophisticated concealment. Litwin argues that the perjury

charge was used as part of the basis for the sophisticatedconcealment enhancement of the tax sentence; thus, the

perjury count should have been grouped with the tax

offense under subsection (c) because it was used as “an

adjustment to” the tax sentence.
Nos. 01-2302 & 01-3414 17

6 As did Chavin, Litwin asserts that the fact that there are different victims is irrelevant to the grouping determination under subsection (c). We reject Litwin’s argument just as we did Chavin’s.

Identity of victims is not a determinative factor under section (c),

but it is a “primary consideration.” U.S.S.G. § 3D1.2, cmt. n.7.

7 At the sentencing hearing the district court stated: “[w]hat we

are talking about here, as I understand it, is in one context lying

to the United States, in another context lying in effect to the

bankruptcy court and Mr. Chavin’s creditors. I think that means

there are different victims. I think it means that the criminal

(continued...)

We begin by noting that the commentary specifically

states that subsection (c) was intended to apply only

to counts that are “closely related.” Id. § 3D1.2 cmt. n.5.

While we recognize that Glickman’s perjury did to some

extent aid in the perpetuation of the tax conspiracy: the

ostensible purpose of the perjury was to keep Chavin’s

assets hidden from his creditors. Consequently, we doubt

that these counts are closely related.6

However, the reason we reject Litwin’s argument for

grouping is that his situation simply does not fit within the

primary purpose of subsection (c), which is to “prevent

‘double counting’ of offense behavior.” Id. § 3D1.2 cmt. n.5.

Refusal to group the perjury offense and the tax conspiracy offense did not result in double counting here because,

as was brought out at oral argument, Litwin would have

received the same enhancement for sophisticated concealment even if the perjury charge was not considered

at all. In other words, other evidence besides the perjury

offense provided ample support for the sophisticatedconcealment enhancement. Indeed, the district court appears to have concluded that the perjury actually did not

provide any support to the sophisticated-concealment enhancement because the purpose of the perjury was not to

cover up the tax crimes.7

 Consequently, it cannot be said
18 Nos. 01-2302 & 01-3414

7 (...continued)

objective is a different one. I don’t think it’s fair to say the conduct

is treated as a specific offense characteristic if we say they concealed it in one context. In another they lied about it in bankruptcy.” (Tr. 45-46) (emphasis added).

that the perjury charge was double counted because it was

not counted at all under the sophisticated-concealment

enhancement.

3. Tax-Loss Calculation: Unclaimed Deductions

Chavin and Litwin argue that they were improperly sentenced because the tax-loss figure upon which the district

court based its sentence was inflated for two reasons: First,

they contend that the district court should have reduced the

tax-loss figure by the amount of legitimate but unclaimed

deductions on Chavin’s tax return. Second, they maintain

that part of the bad debt loss Chavin took was legitimate

and should not have been considered in determining tax

loss.

We start with the unclaimed-deductions issue. Chavin

and Litwin were sentenced on the tax counts under § 2T1.1

of the guidelines. Assessing the proper sentence under

§ 2T1.1 requires a determination of the “tax loss” resulting

from the offense. Section 2T1.1(c)(1) provides the definition

of tax loss applicable to this case: “If the offense involved

tax evasion or a fraudulent or false return, statement, or

other document, the tax loss is the total amount of loss that

was the object of the offense (i.e., the loss that would have

resulted had the offense been successfully completed).”

U.S.S.G. § 2T1.1(c)(1). Also, notes (A) and (C) under this

subsection provide a further explanation of how to calculate

tax loss in certain circumstances: 
Nos. 01-2302 & 01-3414 19

(A) If the offense involved filing a tax return in which

gross income was underreported, the tax loss shall be

treated as equal to 28% of the unreported gross income . . . unless a more accurate determination of the

tax loss can be made.

. . .

(C) If the offense involved improperly claiming a deduction to provide a basis for tax evasion in the future,

the tax loss shall be treated as equal to 28% of the

amount of the improperly claimed deduction . . . unless

a more accurate determination of the tax loss can be

made.

U.S.S.G. § 2T1.1(c)(1)(A) & (C). Chavin and Litwin assert

that if the district court had considered all of the legitimate

deductions that Chavin mistakenly failed to claim on his

1992 return then the tax-loss figure would have been reduced from $199,000 to $57,352, which would have corresponded to a lower sentencing level.

The issue of whether to allow consideration of legitimate

but unclaimed deductions in the determination of tax loss

hinges on the definition of “tax loss.” On the one hand,

Chavin and Litwin argue, in essence, that “tax loss” refers

to the actual amount of loss suffered by the government as

a result of the tax scheme. If we accept this interpretation,

then unclaimed deductions should be considered because

the government did not actually lose as much money as the

scheme intended since the unclaimed deductions serve to

offset the amount that the defendants attempted to evade.

On the other hand, the government contends that “tax loss”

refers to the amount of loss that the defendant attempted or

intended to create through his tax offense. If we accept this

interpretation, then unclaimed deductions should not be

taken into account because they have no relevance to the

amount of loss that the scheme attempted to produce.
20 Nos. 01-2302 & 01-3414

It is apparent from the definition of “tax loss” provided in

the guidelines that the government has the correct position.

The guidelines state that “tax loss is the total amount of

loss that was the object of the offense.” Id. § 2T1.1(c)(1). We

take the phrase “the object of the offense” to mean that the

attempted or intended loss, rather than the actual loss to

the government, is the proper basis of the tax-loss figure.

Here, the object of Chavin’s offense was the amount by

which he underreported and fraudulently stated his tax

liability on his return; reference to other unrelated mistakes on the return such as unclaimed deductions tells us

nothing about the amount of loss to the government that

his scheme intended to create. 

Chavin and Litwin argue that we should accept their

interpretation because it is less subjective than the government’s interpretation. They contend that trying to determine the loss that the defendant intended to create is

simply too speculative. While in principle it is true that

trying to assess intentions is often a subjective endeavor,

we strongly disagree that the government’s view leads to

more subjective results. Here, the defendants’ intention is

embodied in the tax return that was filed with the IRS. We

need to look no further than that return to find the tax-loss

figure under the government’s view. In fact, it is the defendants’ position that would insert subjectivity into the

calculation because it would require us to recreate a “perfect” tax return, taking into account all the legitimate unclaimed deductions, which would undoubtedly engender a

great deal of dispute between the parties over which deductions were legitimate and which were not.

Defendants further argue that the 1993 changes in the

commentary to the tax-fraud sections of the guidelines

mandate courts to consider unclaimed deductions. Before

1993, § 2T1.1(a) defined “tax loss” as the greater of (1) the

total amount of tax that the taxpayer evaded or attempted

to evade; and (2) 28% of the amount by which the greater of
Nos. 01-2302 & 01-3414 21

8 The actual language of pre-1993 § 2T1.1(a) states: “the ‘tax loss’

is the greater of: (A) the total amount of tax that the taxpayer evaded or attempted to evade; and (B) the ‘tax loss’ defined in

§ 2T1.3.” U.S.S.G. § 2T1.1(a) (1992). Section 2T1.3(a)(2) provided

that “the ‘tax loss’ is 28 percent of the amount by which the greater of gross income and taxable income was understated.” Id.

§ 2T1.3(a)(2).

gross income and taxable income was understated.8

U.S.S.G. §§ 2T1.1(a) & 2T1.3(a)(2) (1992). The commentary

to this section provided that the “alternative standard [the

28% rate] may be easier to determine, and should make

irrelevant the issue of whether the taxpayer was entitled to

offsetting adjustments that he failed to claim.” Id. § 2T1.1

cmt. n.4. When the Guidelines were amended in 1993, this

note was deleted. Defendants contend that this deletion

means that now courts must consider offsetting adjustments.

Defendants, however, do not acknowledge that the entire

definition of tax loss was changed by the 1993 amendments.

The government offers an equally plausible reason as to

why the commentary about offsetting adjustments was

deleted, that takes account of the new “tax loss” definition.

The government contends that the language was deleted

because the new tax-loss definition specifically excludes

consideration of unclaimed deductions on its face by

defining tax loss as the “object of the offense.” Consequently, the explanatory note was no longer required. We

agree with the government that the current definition of tax

loss appears to exclude consideration of unclaimed deductions, and we refuse to ignore this definition based on

the fact that certain language was deleted from the commentary notes in 1993.

Finally, defendants base their argument in favor of the

consideration of unclaimed deductions on the language in
22 Nos. 01-2302 & 01-3414

9 The Second Circuit recently affirmed this position in United

States v. Gordon, 291 F.3d 181, 187 (2d Cir. 2002).

10 The government notes in its brief how its expert, Ellis, correctly

argued for a “more accurate determination” of the rate:

Ellis determined that the total amount of unreported income

was $674,625. He could have multiplied this figure by the

28% presumptive rate . . . and been done with it. However, he

made ‘a more accurate determination,’ because some of that

unreported income was ordinary income and some was capital

(continued...)

§ 2T1.1(c)(1)(A) and (C), which states “the tax loss shall be

treated as equal to 28% of the amount of the unreported

gross income . . . unless a more accurate determination of

the tax loss can be made.” U.S.S.G. § 2T1.1(c)(1)(A) & (C)

(2000) (emphasis added). Chavin and Litwin contend that

this provision plainly requires the sentencing court to

recalculate the defendant’s tax return considering the

unclaimed deductions if such consideration would result in

a “more accurate determination” of tax loss. Defendants

point out that in dicta the Second Circuit in United States

v. Martinez-Rios stated that the phrase “a more accurate

determination” allows a defendant to have legitimate but

unclaimed deductions considered. 143 F.3d 662, 671 (2d

Cir. 1998).9

 We note that the Tenth Circuit has questioned

the Second Circuit’s interpretation, stating “[w]e do not

interpret this provision as giving taxpayers a second opportunity to claim deductions after having been convicted

of tax fraud.” United States v. Spencer, 178 F.3d 1365, 1368

(10th Cir. 1999). The Tenth Circuit further explained that

the phrase “a more accurate determination” simply allows

the defendant or the government to argue for a rate that is

“more accurate” than the 28% presumptive rate. Id. at 1368.

It is our view that the Tenth Circuit interpreted the

guideline correctly.10
Nos. 01-2302 & 01-3414 23

10 (...continued)

gain, and the two are taxed at different rates depending on

the income of the taxpayer. 

(Gov. Br. at 29).

11 We recognize that Wu was decided under the pre-1993 guidelines, but the principle expressed there is still applicable.

Given the definition of tax loss discussed above, we simply cannot read the phrase “a more accurate determination”

to allow for consideration of unclaimed deductions. Considering unclaimed deductions is outside the purview

of what we are trying to accomplish in tax-loss calculations,

which as the Tenth Circuit stated, is to “merely assess[ ]

the tax loss resulting from the manner in which the defendant chose to complete his income tax returns.” Id. at

1368. It is simply not the role of this court to consider

other hypothetical ways that the defendant could have

completed his return. United States v. Wu, 81 F.3d 72, 75

(7th Cir. 1996).11

4. Tax-Loss Calculation: the $339,000 Loan Payment

Finally, Chavin and Litwin argue that $339,000 of the

claimed $900,000 bad debt loss was in fact a legitimate

deduction, and should not have been included in the taxloss figure upon which their sentence was based. In 1992,

Chavin made a $339,000 payment to Cole Taylor Bank as

a guarantor of a loan the bank had made to SCV. This

payment, as reflected in SCV’s financial statements, created

a $339,000 debt on the part of the company to Chavin,

adding to SCV’s already substantial indebtedness to him.

This $339,000 debt was part of the $900,000 bad debt loss

that Chavin claimed on his 1992 tax return. The defendants

argued at trial that the $339,000 debt was legitimately

deducted. The jury returned a general verdict finding de-
24 Nos. 01-2302 & 01-3414

fendants guilty on all tax counts. At sentencing, the defendants argued that while the jury convicted them of

having created a fraudulent bad debt loss, the jury did not

specify the amount of the loss that was illegitimate. Thus,

they maintained that it was still an open question as to

whether Chavin was entitled to the $339,000 deduction.

The district court rejected the argument, finding that the

jury had determined that Chavin improperly took a bad

debt loss of $900,000 and was not entitled to any portion of

it. Consequently, the district court sentenced defendants

based on a $900,000 tax loss figure, noting that to make a

finding that the tax-loss figure was lower than $900,000

would contradict the jury’s verdict.

On appeal, Chavin again argues that the jury did not

decide the issue of whether the $339,000 deduction was

legitimate, and that because the verdict did not necessarily

resolve the issue, the district court erred by not making its

own finding on the issue. We agree with the district

court’s conclusion that the jury had already preclusively

decided the issue and that the sentencing court could not

sentence defendants based on an amount different from

what the jury decided. Defendants were convicted on all the

tax offenses charged—Counts 1 through 6. All of these

counts reference $900,000 as the bad-debt-loss figure, and

make no mention of or distinction between the various elements that comprised the total debt. Defendants’ attempt

to cut the total debt into pieces and argue about the individual parts at sentencing was, as the district court

found, unavailing.

In any event, the record reveals that Chavin was not

entitled to the deduction for which he argued. Chavin argues that the $339,000 was deductible because SCV was

insolvent prior to and independent of the sham sale to

Glickman and because he had personally guaranteed the

loan he had paid on SCV’s behalf. These factors alone, however, do not trigger the ability to take a deduction. Section
Nos. 01-2302 & 01-3414 25

166(d) of the tax code, the section under which Chavin

attempted to take the deduction on his 1992 return, permits

individuals to take deductions for nonbusiness debts

only when those debts become “worthless.” 26 U.S.C. §

166(d)(1)(B) (2000). As this court has noted, “[t]he criterion

of worthlessness is interpreted strictly: the deduction is

unavailable if even a modest fraction of the debt can

be recovered.” Buchanan v. United States, 87 F.3d 197,

198 (7th Cir. 1996). At the end of 1992, SCV, though insolvent, still had assets worth $839,000—against liabilities

of $1,240,000. Given this amount of assets, it was reasonable for the jury to have found that Chavin had at least

a “reasonable prospect of recovering” a “nontrivial” amount

of the money SCV owed him. Id. at 200. 

As the government points out, the real triggering event

that made the debt worthless and thereby “entitled” Chavin

to the bad-debt-loss deduction was the sham sale to

Glickman, which drained SCV of all its assets and ensured

its inability to repay him. Indeed, as even the defense’s

tax expert noted at trial, Chavin’s tax return itself showed

that the sale to Glickman, and nothing else, was the triggering event. Because the event that triggered the availability of the deduction was fraudulent, the deduction itself was

illegitimate. Therefore, Chavin was not entitled to any

portion of the $900,000 bad debt loss, not even the $339,000

portion related to the loan payment.
26 Nos. 01-2302 & 01-3414

III. Conclusion

For the foregoing reasons, we AFFIRM the sentences imposed by the district court on Litwin and Chavin.

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—12-13-02