Source: http://openjurist.org/994/f2d/1542
Timestamp: 2016-02-11 06:58:16
Document Index: 42273515

Matched Legal Cases: ['§ 7201', '§ 6653', '§ 61', '§ 2255', '§ 6653', '§ 7201', '§ 6653', '§ 7201', '§ 6653', '§ 7481', '§ 7481']

994 F2d 1542 Blohm v. Commissioner of Internal Revenue | OpenJurist
994 F. 2d 1542 - Blohm v. Commissioner of Internal Revenue HomeFederal Reporter, Second Series 994 F.2d.
994 F2d 1542 Blohm v. Commissioner of Internal Revenue 994 F.2d 1542
72 A.F.T.R.2d 93-5347, 93-2 USTC P 50,518
Nelson M. BLOHM and JoAnn M. Blohm, Petitioners-Appellants,v.COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.
1.  San Pedro to St. Lucy:  $  429,374.36
2.  San Pedro to Linfield:     860,038.14
TOTAL:  $1,289,412.50
In 1986 the government granted immunity from prosecution to Ritchey in exchange for evidence of tax fraud committed by Blohm and others. In 1988 a grand jury indicted Blohm for tax evasion in violation of 26 U.S.C. § 7201.5 JoAnn M. Blohm was not indicted. Blohm pled guilty, but denied guilt pursuant to North Carolina v. Alford, 400 U.S. 25, 91 S.Ct. 160, 27 L.Ed.2d 162 (1970).6 The district court entered judgment against him. Blohm moved to vacate his sentence, quash the indictment or grant a new trial. He alleged prosecutorial misconduct causing a violation of his constitutional rights in two respects: (1) that the indictment was based solely on Ritchey's affidavit, which, Blohm claimed, the government knew to be false, and (2) that his guilty plea was coerced by the government's making a false offer of proof at his plea hearing.
Shortly after Blohm pled guilty in 1988, the Commissioner issued the Blohms a notice of deficiency for $269,035 of unreported income from the Cayman Islands kickback ($143,268) and the Kitchen Table kickback ($125,767). As to the former, the Commissioner alleged that Blohm applied his one-third share of the proceeds to cancel the debt he owed to the Stickelber Trust. The claimed tax deficiency totalled $133,749. The Commissioner further determined an addition to tax of $119,725 under 26 U.S.C. § 6653(b)7. The determination was based upon Blohm's guilty plea, an affidavit of Ritchey and a letter from Stickelber to an IRS agent in which he linked Blohm to both the Cayman Island and Kitchen Table kickbacks. The Blohms petitioned for a redetermination before the Tax Court.
At trial the government renewed its motion for relief from the binding effect of certain stipulations of fact because the evidence did not support those stipulations. Specifically, stipulation twenty-two incorrectly averred that the $1,289,412.50 transferred from Marion to the account of Marion Coal occurred on February 19, 1981. The record demonstrated that the correct date was one day earlier, February 18, 1981. Noting that it was not bound by facts contrary to evidence in the record, Kirchner, Moore & Co. v. Commissioner, 54 T.C. 940, 1970 WL 2264 (1970), aff'd, 448 F.2d 1281 (10th Cir.1971), the court granted the motion as to stipulation twenty-two. It denied the motion as to other challenged stipulations.
We review the Tax Court's fact findings for clear error. Atlanta Athletic Club v. Commissioner, 980 F.2d 1409, 1411 (11th Cir.1993). A finding of fact is clearly erroneous "if the record lacks substantial evidence to support it," Thelma C. Raley, Inc. v. Kleppe, 867 F.2d 1326, 1328 (11th Cir.1989), such that our review of the entire evidence leaves us "with the definite and firm conviction that a mistake has been committed." United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 541, 92 L.Ed. 746 (1948); see also Anderson v. Bessemer City, 470 U.S. 564, 573, 105 S.Ct. 1504, 1511, 84 L.Ed.2d 518 (1985). The Tax Court's rulings on the interpretation and application of the statute are conclusions of law reviewed de novo. Estate of Wallace v. Commissioner, 965 F.2d 1038, 1044 (11th Cir.1992). Moreover, whether a taxpayer received income is an ultimate fact and as such is to be treated as a legal rather than a factual determination to be reviewed de novo. Weiss v. Commissioner, 956 F.2d 242, 244 (11th Cir.1992).
Ordinarily, the Commissioner's determination of tax liability is presumed correct. Welch v. Helvering, 290 U.S. 111, 115, 54 S.Ct. 8, 9, 78 L.Ed. 212 (1933); Tax Court Rules of Practice and Procedure 142(a). The taxpayer, therefore, bears the burden of proving the determination erroneous or arbitrary. Welch, 290 U.S. at 115, 54 S.Ct. at 9; Webb v. Commissioner, 872 F.2d 380, 381 (11th Cir.1989). For the presumption to adhere in cases involving the receipt of unreported income, however, the deficiency determination must be supported by "some evidentiary foundation linking the taxpayer to the alleged income-producing activity." Weimerskirch v. Commissioner, 596 F.2d 358, 362 (9th Cir.1979). Although a determination that is unsupported by such a foundation is clearly arbitrary and erroneous, id., the required showing is "minimal." Carson v. United States, 560 F.2d 693, 697 (5th Cir.1977) (quoting Gerardo v. Commissioner, 552 F.2d 549, 554 (3rd Cir.1977)).10 Once the Tax Court has found that this minimal evidentiary showing has been made, the deficiency determination is presumed correct, and it becomes the taxpayer's burden to prove it arbitrary or erroneous. Gold Emporium, Inc. v. Commissioner, 910 F.2d 1374, 1378 (7th Cir.1990).
Gross income includes all income from "whatever source derived." 26 U.S.C. § 61(a)(1). Kickbacks are taxable income. See, e.g., Bragg v. Commissioner, 856 F.2d 163, 165 (11th Cir.1988); United States v. Sallee, 984 F.2d 643, 647 (5th Cir.1993). Income is taxed to the party who earns it. Commissioner v. Bollinger, 485 U.S. 340, 346, 108 S.Ct. 1173, 1177, 99 L.Ed.2d 357 (1988). A taxpayer is not relieved of the obligation to pay taxes on earned income merely by a transfer of that income to another party. United States v. Basye, 410 U.S. 441, 449-51, 93 S.Ct. 1080, 1085-86, 35 L.Ed.2d 412 (1973). Thus, if the evidence supports a finding that Blohm participated in either kickback scheme, then all income attributable to him is to be taxed. We must, therefore, determine whether the evidence supports the Tax Court's conclusion that Blohm participated in both kickback schemes, and by so doing, earned the proceeds derived from them.
2. The Kitchen Table Kickback
Their strongest salvos are aimed at Ritchey, who the Blohms claim is a crook and therefore unreliable. The former is clear; the latter is not. The Blohms correctly state that Ritchey gave evidence "not presently available to the Grand Jury" in exchange for immunity from prosecution. They claim that Ritchey was forced to create false evidence against Blohm to save himself from prosecution. That Ritchey agreed to provide new evidence does not, alone, make him inherently incredible. See, e.g., United States v. Greenwood, 974 F.2d 1449, 1457 (5th Cir.1992). Indeed, while the Tax Court found Ritchey to be unsavory, it nonetheless credited his testimony:
62 T.C.M. at 1592. Ritchey's character and the extent of his cooperation with the government were well known to the Tax Court; his motives and credibility were for it to consider in its role as fact finder. See Amadeo v. Zant, 486 U.S. 214, 223, 108 S.Ct. 1771, 1777, 100 L.Ed.2d 249 (1988). We find no clear error.
C. Stipulation of Fact Number Twenty-two
While stipulations are not to be set aside lightly, courts have broad discretion in determining whether to hold a party to a stipulation. See Morrison v. Genuine Parts Co., 828 F.2d 708 (11th Cir.1987), cert. denied, 484 U.S. 1065, 108 S.Ct. 1025, 98 L.Ed.2d 990 (1988); Wheeler v. John Deere Co., 935 F.2d 1090 (10th Cir.1991).
The Blohms argue that the stipulation's reference to February 19, 1981, as the correct date of the Cayman Islands kickback transactions confirms the "capricious use of false evidence" by the IRS because Stickelber and Ritchey were not present in the Cayman Islands on that day. This argument is meritless. The overwhelming evidence contained in the record demonstrates that the stipulated date was simply incorrect. There is both a debit advice documenting when the money was transmitted from the Marion Coal account and a credit advice documenting when this money was deposited into the San Pedro account. The debit advice refers to two dates: "19/2/81," listed on the date line, and "18/2/81," listed in the "particulars" section. The credit advice has no date in the particulars section but has "19/2/81" on the date line. The Tax Court found the date listed in the particulars section of the debit advice (18/2/81), along with Ritchey and Stickelber's testimony that the money was in the Cayman Islands when they were on the 18th, established that the money was indeed there on the 18th. The Tax Court properly found that it was not bound by facts contrary to the record. See Mead's Bakery, Inc. v. Commissioner, 364 F.2d 101, 106 (5th Cir.1966). Moreover, we determined in our review of Blohm's § 2255 petition that the "discrepancy of one day in the arrival time of the funds is insignificant." Blohm v. United States, No. 91-7422 (11th Cir. May 22, 1992) (per curiam), 964 F.2d 1147 (Table). Accordingly, we see no abuse of discretion.
Collateral estoppel bars relitigation of an issue previously decided if the party against whom the prior decision is asserted had "a 'full and fair opportunity' to litigate that issue in an earlier case." Allen v. McCurry, 449 U.S. 90, 94-95, 101 S.Ct. 411, 414-15, 66 L.Ed.2d 308 (1980). For collateral estoppel to be invoked 1) the issue must be identical in the pending case to that decided in the prior proceeding; 2) the issue must necessarily have been decided in the prior proceeding; 3) the party to be estopped must have been a party or have been adequately represented by a party in the first proceeding; and 4) the precluded issue must actually have been litigated in the first proceeding. In re Raiford, 695 F.2d 521, 523 (11th Cir.1983).
Next, Blohm argues that an Alford plea is analogous to a plea of nolo contendere11 and thus has no collateral estoppel effect in a subsequent civil proceeding. See Hudson v. United States, 272 U.S. 451, 455, 47 S.Ct. 127, 128, 71 L.Ed. 347 (1926); Raiford, 695 F.2d at 523; Doherty v. American Motors Corp., 728 F.2d 334, 337 (6th Cir.1984). Blohm claims, therefore, that he should be free to relitigate the issue of fraud in his § 6653(b) proceeding. We disagree.
A criminal tax fraud conviction under 26 U.S.C. § 7201 estops a taxpayer from denying liability for civil fraud under 26 U.S.C. § 6653(b) for the same year. Klein v. Commissioner, 880 F.2d 260, 262 (10th Cir.1989); Carlson v. Commissioner, 65 T.C.M. 1880, 1883, 1993 WL 27506 (1993). This is because the "elements of criminal tax evasion and of civil tax fraud are identical." Gray v. C.I.R., 708 F.2d 243, 246 (6th Cir.1983). The same result attaches if the conviction is based upon a guilty plea. Id. (stating that "a guilty plea is as much a conviction as a jury trial"); Manzoli v. Commissioner, 904 F.2d 101, 105 (1st Cir.1990). Thus, for purposes of applying the doctrine of collateral estoppel, there is no difference between a judgment of conviction based upon a guilty plea and a judgment rendered after a trial on the merits. See United States v. Killough, 848 F.2d 1523, 1528 (11th Cir.1988); Mazzocchi Bus Co., Inc. v. Commissioner, 65 T.C.M. (CCH) 1858, 1865, 1993 WL 20139 (1993). The conclusive effect is the same. Raiford, 695 F.2d at 523.
The collateral consequences of a guilty plea may not be avoided by the simultaneous assertion of innocence. A guilty plea is "more than a confession which admits that the accused did various acts." Boykin v. Alabama, 395 U.S. 238, 242, 89 S.Ct. 1709, 1711, 23 L.Ed.2d 274 (1969). It is an "admission that he committed the crime charged against him." Alford, 400 U.S. at 32, 91 S.Ct. at 164; McCarthy v. United States, 394 U.S. 459, 466, 89 S.Ct. 1166, 1170, 22 L.Ed.2d 418 (1969). A guilty plea is distinct from a plea of nolo contendere. A guilty plea is an "admission of all the elements of a formal criminal charge." McCarthy, 394 U.S. at 466, 89 S.Ct. at 1170. A nolo contendere plea is instead a "consent by the defendant that he may be punished as if he were guilty and a prayer for leniency." Alford, 400 U.S. at 35 n. 8, 91 S.Ct. at 166 n. 8. Guilty pleas must be rooted in fact before they may be accepted. Fed.R.Crim.P. 11(f); Alford, 400 U.S. at 35 n. 8, 91 S.Ct. at 166 n. 8. No similar requirement exists for pleas of nolo contendere. Alford, 400 U.S. at 35 n. 8, 91 S.Ct. at 166 n. 8. Courts may accept them without inquiring into actual guilt. Id.
Once accepted by a court, it is the voluntary plea of guilt itself, with its intrinsic admission of each element of the crime, that triggers the collateral consequences attending that plea. Those consequences may not be avoided by an assertion of innocence. As long as the guilty plea represents a voluntary and intelligent choice among alternative courses of action open to the defendant, see Boykin v. Alabama, 395 U.S. 238, 242, 89 S.Ct. 1709, 1711, 23 L.Ed.2d 274 (1969), and a sufficient factual basis exists to support the plea of guilt, see Fed.R.Crim.P. 11(f), the collateral consequences flowing from an Alford plea are the same as those flowing from an ordinary plea of guilt. Were this not so, defendants pleading guilty would routinely proclaim their innocence to reap two benefits: (1) the avoidance of a trial and a possible reduction in sentence, and (2) the extinguishment of all collateral consequences of their plea. Nothing in Rule 11 of the Federal Rules of Criminal Procedure or in Alford sanctions this distortion of the pleading process. As we noted in a similar context,
We respectfully differ with the Ohio Court of Appeals. A guilty plea, even one accompanied by a claim of innocence, is not a plea of nolo contendere.12 See Fed.R.Crim.P. 11. A guilty plea's basic chemistry is not transformed by a concurrent claim of innocence. The collateral consequences stemming from a guilty plea remain the same whether or not accompanied by an assertion of innocence. A taxpayer who enters an Alford plea to tax evasion under § 7201 is therefore collaterally estopped from denying fraud in a subsequent civil proceeding with respect to the same year. Lackey v. Commissioner, 35 T.C.M. (CCH) 1330, 1337, 1976 WL 3478 (1976). The Tax Court properly estopped Blohm from denying liability for the additional tax for fraud assessed under § 6653(b).
Blohm further argues that courts should explore the circumstances "behind" a guilty plea to determine the plea's collateral effect. He claims that he did not understand that his plea might later be used against him in a civil proceeding, and thus this misunderstanding should not be used against him. He cites Plunkett v. Commissioner, 465 F.2d 299, 306 (7th Cir.1972), a case wherein the court estopped a taxpayer from denying civil liability for tax evasion where the taxpayer had previously pled guilty to the charge. Blohm argues that the Plunkett court examined the circumstances behind the plea when it noted that the "[p]etitioner did not misunderstand the terms or immediate consequences of the agreement and his plea of guilty." 465 F.2d 299 at 306. We note, however, that the court's remark in Plunkett was made pursuant to its examination of whether the defendant's plea was voluntary, not whether the defendant misperceived the plea's collateral consequences. The district court here examined Blohm thoroughly at his plea hearing and found the plea to be voluntary and made "with the understanding of the nature of the charge and the consequences of the plea." Blohm plea colloquy at 20. A close examination of the plea colloquy's transcript reveals no clear error.
400 U.S. at 37, 91 S.Ct. at 167. Guilty pleas accompanied by assertions of innocence have come to be known as "Alford " pleas.
Because the Tax Court ruled that Blohm earned $143,268 from the Cayman Islands kickback and thus should have reported that money as income, the Blohms filed a tax refund action in federal district court seeking, inter alia, a refund for taxes paid for 1983 on the forgiveness of debt. They claimed that they faced double taxation for the taxes due on the Cayman Islands kickback proceeds and those paid on the 1983 satisfaction of debt. The district court found that the Blohms failed to comply with the statute of limitations. Blohm v. United States, No. 91-0831-B-C, 1993 WL 117988 (S.D.Ala. Jan. 19, 1993). Moreover, the district court held that the Blohms' assertions of equitable estoppel and equitable recoupment, two exceptions to the limitations requirement, were inapplicable. The district court further found that the Blohms' third claimed basis for an exception to the limitations requirement, mitigation, was unripe because the Tax Court's decision had yet to become "final" pursuant to 26 U.S.C. § 7481. Once appealed to the Court of Appeals, a Tax Court decision does not become final until (1) the decision has been affirmed by the Court of Appeals and no petition for certiorari has been timely filed or, if filed, the petition for certiorari has been denied, or (2) the decision has been reversed or modified by the Court of Appeals and no petition for certiorari has been timely filed or, if filed, the petition for certiorari has been denied, and, if the case has been remanded to the Tax Court for rehearing, the Tax Court has rendered its decision upon rehearing. See 26 U.S.C. § 7481. Thus, any relief due the Blohms for double taxation may appropriately be sought in a refund action in federal district court once the Tax Court's decision becomes final
As stated by the Carson court, "[t]he tax collector's presumption of correctness has a herculean muscularity of Goliathlike reach, but we strike an Achilles' heel when we find no muscles, no tendons, no ligaments of fact." 560 F.2d at 696
Under a plea of nolo contendere, a defendant does not expressly admit his guilt, but nonetheless waives his right to trial and authorizes the court for purposes of the case to treat him as if he were guilty. Alford, 400 U.S. at 35, 91 S.Ct. at 166
The Supreme Court's statement in Alford that there was no "material difference between a plea that refuses to admit commission of the criminal act and a plea containing a protestation of innocence," 400 U.S. at 37, 91 S.Ct. at 167, does not affect our holding here. Alford specifically addressed the question of whether an express admission of guilt was a constitutional requisite to the imposition of a criminal penalty. The Court held that, like pleas of nolo contendere, guilty pleas coupled with assertions of innocence did not bar entry of judgment against the defendant. Alford did not address in any fashion the collateral effect of such pleas