F ILED U.S. COURT O F APP EALS EL EV EN TH C IRC UIT Jun e 28 , 2 006 T HOMA S K. KA HN CLERK

The Ho norab le A nne C. C onw ay , U .S. D istrict Judg e for the Midd le D istrict of Florida , s itting * by des ig nation [DO N OT PUBLISH]

IN THE UN ITED STATES COURT OF APPEALS FO R T HE EL EV EN TH CIRC UI T

____ ____ ____ ____ ____ ____ N o. 05- 1375 1

____ ____ ____ ____ ____ ____ U . S. T ax Ct . N o. 135 87- 01 PAUL MCGOWA

N, Petitioner-Appellee,

ve rs us COMM ISSI ONER OF INTERNAL REVENUE, Re spon de nt- Appe llant.

____ ____ ____ ____ ____ ____ Petition for Reviewof a F inal Order of the United State s Ta x Court

____ ____ ____ ____ ____ ____ _ (J un e 28, 200 6) Before BL ACK

and PRY OR, Circuit Judges, and CO NWAY , D istrict Judg e. *2

CON WAY , D istrict Judg e: In De cem ber 2001, Paul McG owan filed, in tax court, a petition for a re de te rm inatio n of

ade fi ci en cy , w hic h th e Co m m iss ion er of I nte rn al Re ve nue Se rv i ce h adas s es s edag ai n s th i m . Th e C o m m i s s i o n er , r el yin g o n Mc Go wa n ’s pr ior c ri m ina l t ax c onvi ct ion s, c la im ed Mc G ow anund er -r ep orte d hi s in co m e w ith the intent to evade taxes in 1991, 1992 , and 19 93. T he tax court determ ined that the Co m m iss ion er f ai le d to m ee t hi s burd enof e sta bli shi ng a spe ci fi c int en t t o ev ad e ta x by

c le ar and c onvi nc ing e vid en ce . T he Co m m iss ion er appe al ed . F or

the reas on s s ta te d b el ow, we af fir m . I. BACKGROUND Pa ul M cG ow ansol el y

ow ne d and o pe rate d M cG ow anCo nstru ct ion Com pany (“ Com pany ”), a subchapter S c orporation, for which McGow an wa s req ui redto rep or t al l o f th e Co m pa ny’ s i nc om e o n h is pe rs on al in co m e ta x re tu rn . Mc G ow anund er -r ep orte d hi s in co m e fr om 199 1 to 199 3. In199 8, Mc G ow anw as ind ic te d, tr ie d, and c onvi ct ed of six ta x c ri m es : three counts of willfully

m aking and s ubscribin g false individual incom e tax returns for his Com

pany in 199 1, 1992, and 1993 , in violation o f 26 U. S. C. §720 6( 1) ; and thr ee c ount s of w ill fu lly a idi ng and a ssi sti ng i n th e pr ep ar at ionof fa lse c or por at e inc om e ta x r et

ur ns f or the sam e thr ee y ears , in vio la tio n of 263

U. S. C. §720 6(2). In addition to rec eiving a prison sentence and a f ine, Mc Gow an w a s o r d e r e dt o c o o p e r a t e wi th th e I R S t o d e t e rmi n e h i s c i v i l t a x l i ab i l i ty. Co nte ndi ng tha t M cG ow andid not c oope rate w iththe I RS a s or de re d, the Co m m iss ion er iss ue d M cG ow ananot ic e de te rm ini ng i nc om e ta x de fi ci en ci es in the am ount s of $103 ,299, $36,968, and $67,180. A dditi onally , Mc Gow an owed ci vil f ra ud f ine s of $77 , 474, $27 , 726 an d $5 0, 385 fo r ta x y ears 199 1, 199 2, 199 3, re s p ec t i v el y. Th e d ef

i ci en cy wo u l db e t i m e- b arre du n l es s Mc Go wa n ’s unde rp ay m en ts w er e re la te d to aspe ci fi c int en t t o e va de ta x. T he re is no s ta tut e of lim itatio ns f

or de fi ci en ci es if

the ta xpay er

a ct ed w iththe spe ci fi c int en t t o e va de ta xe s. 2 6 U.S.C. § 65 01 (c)( 1) . Mc G ow anf

ile d ape tit ionin the ta x c ourt f or ar ed et er m inatio n of

the de fi ci en cy . A t tri al , Mc G ow anc la im ed that the und er

paym en ts w er e the r es ult of co nf usi on b etw ee n hi m

and h is a cc ount an t. Mc G ow ante sti fi ed that hi s a cc ount an t told h im that the diverted funds were either re paym ents of loans that McGowan ha d m ad e to th e Co m

pa ny or were a return o f sh areh ol de r eq ui ty. T he ta x c ourt he ld tha t the Co m m iss ion er f ai le d to m ee t hi s burd enof es tabl is hi ng McGo wan ’s in te nt to ev ad e ta x b y cle ar an d c on vi nc in g e vi de nc e. T he c ourt a cknow le dge d th at Mc G ow an ’ s c ri m ina l c onvi ct ionw as aba dge of fraud, which estopped him from contesting that he filed false returns and under-4

re porte d hi s taxe s f

or 199 1 to 199 3. H ow ev er , the c ourt st at ed that the Com m issio ner could not rely

solely on the prior convictio n to dem onstrate an in te nt to ev ad e ta x. The ta x court found th e Com m issio ner’ s evidence of intent to evade tax unc onvi nc ing ; the c ourt he ld tha t M cG ow anke pt a de quate and c om ple te r ec or ds and that it was the ac countant’s fa ult for not usi ng tho se rec ords when he com piled the ta x r et

ur ns. T he c ourt a lso f

ound that M cG ow andid

f ull y c om ply w iththe Co m m is si on er’s i nv es ti ga ti on . T he c ri tic al iss ue f

or the ta x c ourt w as the Co m m iss ion er ’ s strate gy

of not ad dr es sin g M cG ow an ’ s c onf usi on a bout the share hol de r ac co unt s a t tri al and, instead, resting on McGow an’ s convictio n in the crim inal case. T he court co nc lud ed , ba se d onthe e vid en ce pr es en te d inthe ta x c as e, that M cG ow andid not em plo y any sc he m e to c onc ea l i nc om e, statin g th at Mc G ow anbe lie ve d th at

any differe nce betwe en the incom e he re ported and the am ount s in the sharehold er ac co unt s w oul d e ve ntu al ly be r ec onc ile d w he n he pa id t ax es on the inc om e at a la te r po in t. T he de te rm inativ e iss ue s onappe al are 1) w he the r the ta x c ourt e rr ed by not co llate ra lly

e sto ppi ng M cG ow anf

ro m arg uin g th at

he did not a ct w iththe spe ci fi c int en t t o e va de ta x ba se d onhis pr ior c ri m ina l c onvi ct ionf

or und er -r ep ortin g hi s5

inc om e thr oughf

al se ta x r et

ur ns and 2 ) w he the r the ta x c ourt c le ar ly e rr ed by co nc lud ing that the Co m

m iss ion er f ai le d to e sta

bli sh an inte nt t o e va de ta x by cl ear a ndco nv in ci ng ev id en ce. II. DISCUSS ION T he Co urt r ev ie w s de novo the tax court’ s determ ination of w hether co llate ra l e sto ppe l a

ppl ie s. Q uin n v. Mo nr oe Co unty , 330 F . 3d 1 320, 132 8 ( 11 th Cir. 2003 ). Collatera l estoppel prevents relitigation of an issu e that w as p re v i o u s l y d et er m i n edi f t h e p ar t y ag ai n s twh o m th e i s s u edwa s d ec i d edh ad“ ‘a fu ll an d fa ir o pp or tu ni ty to l it ig at e th atis su e in an earl ie r cas e.’” Blo hm v. C.I.R ., 994 F. 2d 1 542, 155 3 ( 11 Ci r. 199 3) ( quot ing A lle n v. Mc Curr y , 449 U . S. 90, 94- th 95, 101 S . Ct . 441 , 414 -1 5, 66 L . E d. 2d 3 08 ( 1980 )) . F our e le m en ts m

ust be pr es en t f or c oll at er al e sto ppe l t o be inv oke d. F ir st, the iss ue in the pr es en t c as e m ust be the sam e as the iss ue in the pr ev iou s c as e. I d. S ec ond, the iss ue m ust have be enne ce ssari ly

de ci de d inthe pr ior

li tig at ion . I d. T hir d, the party to be es top pe d m

ust have be ene ith er

aparty to the pr ev iou s li tig at ionor w as a de quate ly re pr es en te d by

anothe r party

in the pr ior

pr oc ee din g. I d. F ourth, the iss ue to be pr ecl ud edm

us t h av e b een li ti ga te d i n t he pri orpro ceed in g. Id . T he iss ue s li tig at ed

in Mc G ow an ’ s c ri m ina l c as e w er e not the sam e as the issue litig ated in McG owan’ s tax court case. T he issues liti gated in the crim inal6

case a gainst McGowan that m eet the elem ents of collateral estoppel are 1) whether McG owan w illfully

filed a f alse return and 2) whether Mc Gow an willfully aided or assisted in th e prepar ation of his tax return. 26 U. S. C. §720 6. O n the other hand, the iss ue in the ta x c ourt c as e w as w he the r Mc G ow anha d th e int en t t o e va de w he n he und er -r ep orte d hi s taxe s. T he j ur y in the c ri m ina l c as e fo und that M cG ow andid w ill fu lly m ak e an d as sis t i n th e pr ep ar at ionof ata x r et ur n, w hic h he did

not be lie ve to be tr

ue , f or a ll thr ee y ears in que sti on. T he ta x c ourt a cknow le dge d M cG ow an ’ s c onvi ct ionand co llate ra lly

e sto ppe d hi m

f ro m c ont es tin g th at

he f ile d f al se 199 1, 199 2, and 1 993 re tu rn s an dth at an u n d er p aym en tex i s t edfo r t h o s e yea rs . Ho we v er , M cG o wa n ’s crim inal convictio n did n ot disp el the Com m issio ner’ s burden to p rove by clear an d c on vi nc in g e vi de nc e th atMcGo wan in te nd edto ev ad e ta x. T he re w as no c oll at er al e sto ppe l ari sin g f ro m the c ri m ina l c onvi ct ionon the int en tio n to e va de ta x is sue be ca use the re w as no i de nti ty of iss ue s be tw ee n th e cr im ina l c as e an d th e ta x c as e re gard ing int en tio n to e va de ta x. Wri ght v. Co m m ’ r, 84 T . C. 636 , 639 ( 1985 ). I n th e cr im ina l c as e, it w as not ne ce ssary

f or the governm ent to establish , nor did the governm ent establish, that McGow an had the intent to evade tax w hen he under-reported his taxes. T he tax court stressed that the int en t t o e va de ta x is ne ve r pr es um ed or im put ed ; i t m

ust be pr ove d by7

ind ep en de nt e vid en ce . T . C. Me m o 20 04- 146 at 6 ( ci tin g B eave r v. Co m m ’ r, 55 T . C. 85, 92 ( 1970 )) . T he c ourt f ound that the Co m

m iss ion er ’ s r el ianc e on Mc G ow an ’ s c ri m ina l c onvi ct ionw as ins uf fi ci en t t o pr ove Mc G ow an ’ s in te nt t o ev ad e ta xe s. As to the second issue, the tax court found that “ the ty pical indicia of an intent to evade taxes [w ere] not present.” Id . Furtherm ore, the court determ ined that the Co m

m iss ion er f ai le d to c ar

ry it s burd enof

pr es en tin g c le ar

and c onvi nc ing ev ide nc e de m onstratin g th at Mc G ow anha d th e spe ci fi c int en t t o e va de ta xe s. T he ta x c ourt’ s f

ind ing that M cG ow anla ck ed the int en t t o e va de ta xe s is af ind ing of fa ct that w ill onl y

be dis tur be d if c le ar ly e rr one ous. S ee K or ec ky v. Co m m ’ r, 781 F. 2d 1 566, 156 8 ( 11 Ci r. 198 6) . T he Co m m iss ion er ha s no t de m onstrate d to thi s th Co ur t t ha t t he tax co ur t cl earl y erre d. III. CONCLUSI ON A lth oughc ri m ina l c onvi ct ion s un de r 26 U . S. C. 720 6( 1) & (2 ) ar e ba dge s of fr au d, the y

are not a lon e co nc lus ive pr oof

that M cG ow anint en tio na lly e va de d hi s ta xe s. T he iss ue of

w he the r Mc G ow anint en de d to e va de inc om e ta x w as not litigated in McG owan’ s crim inal prosecution . In the tax case, the Com m issio ner had the burden of establis hing through clear and convin cing proof that McGow an8

in te nd edto ev ad e in co m e ta x. Th e Co m m is si on er fa il edto m eetth is bu rd en . Acco rd in gl y , th e jud gm en t o f th e ta x c ou rt i s AFF IRM ED.