Opinion ID: 769324
Heading Depth: 1
Heading Rank: 2

Heading: The Restitution Issue on Appeal.

Text: 7 When Tucker committed his conspiracy offense, the Victim and Witness Protection Act gave sentencing courts discretion to order a defendant to pay restitution to crime victims, taking into account the amount of loss sustained by any victim as a result of the offense and the defendant's financial resources and ability to pay. 18 U.S.C. 3664(a) (1985). Tucker concedes that his conspiracy offense is subject to that Act and that a government agency such as the IRS may qualify as a crime victim. See United States v. Minneman, 143 F.3d 274, 284 (7th Cir. 1998), cert. denied sub nom. Punke v. United States, 526 U.S. 1006 (1999). Of course, any amounts paid to the IRS as restitution must be deducted from any civil judgment IRS obtains to collect the same tax deficiency. See United States v. Helmsley, 941 F.2d 71, 102 (2d Cir. 1991), cert. denied, 502 U.S. 1091 (1992). 8 The issue here is the amount of loss sustained by the IRS. Because the government offered no evidence at sentencing, we do not know how the IRS calculated this loss. We only know how the probation officer calculated the loss in preparing the PSR. The PSR focused on the conspirators' reversal of the PCS-CMI merger, the step that eliminated any corporate level tax CMI would have owed had it sold the Plantation assets. To reconstruct the tax loss, the PSR ignored this reversal as fraudulent, treating CMI as having sold the assets. Though CMI is an S corporation, normally free of corporate-level taxation, 1374 of the 1954 Code contained an exception to this principle for S corporations with substantial net long term capital gains. 2 Using the carry-over basis in the Plantation assets that CMI inherited from PCS when those two companies merged, and using 1374 to calculate the corporate-level tax that CMI would have paid on the substantial capital gain realized on the sale of those assets, the PSR determined the tax loss to be over $3.5 million. 9 The problem arises because, before the transactions in question, 1374 was significantly amended by the Tax Reform Act of 1986 (TRA), which was further retroactively amended by the Technical and Miscellaneous Revenue Act of 1988 (TAMRA). 3 These amendments were revenue-enhancing to the government in most situations, but Tucker presented detailed evidence at the sentencing hearing tending to show that application of the new 1374 to CMI's hypothetical sale of the Plantation assets would reduce Tucker's share of the actual tax loss to substantially less than $1 million. The government argued, and the district court agreed at the conclusion of the sentencing hearing, that amended 1374 did not apply. Therefore, the court determined that the tax loss was at least $2.9 million and ordered Tucker to pay $1 million in restitution (the same amount the court ordered co-defendant Marks to pay). 10 On appeal, Tucker argues the district court should have applied amended 1374 and therefore the restitution order must be reversed. The government argues that old 1374 applies, that the PSR calculated Tucker's share of the tax loss under old 1374 as substantially more than $1 million, and that Tucker's accountant witness confirmed the accuracy of this calculation. Therefore, the district court did not abuse its discretion in ordering restitution of $1 million. See United States v. French, 46 F.3d 710, 716 (8th Cir. 1994) (standard of review). 11