Opinion ID: 769324
Heading Depth: 1
Heading Rank: 5

Heading: The Failure of Proof Is Material.

Text: 24 The district court ordered Tucker to pay $1 million in restitution, based upon an actual loss determination in the PSR that cannot be upheld. Tucker urges us to order restitution based upon the tax loss calculated by his accountant applying the TRA and TAMRA amendments to 1374. The government argues that we must remand because it has evidence that will rebut the accountant's calculations. At sentencing, the district court ordered Tucker to present his evidence first and then rejected his loss theory as a matter of law. Because this obviated the need for government rebuttal, we agree the government is entitled to a new sentencing hearing on remand. 25 There is another reason why the case must be remanded for a new sentencing hearing. No witness has articulated the government's theory of tax loss. The present record suggests that Tucker and Marks conspired to reduce the capital gains taxes owing on the sale of Plantation assets in two ways. First, by removing those assets from CMI and transferring them to Tucker, the scheme avoided corporate-level tax altogether. That was the PSR's focus in ignoring the reversal of the PCS-CMI merger. But second, and probably more significant quantitatively, the fraudulent bankruptcy permitted the conspirators to claim a stepped-up basis when the assets were transferred to Tucker in exchange for his sham secured debt. CMI's carry-over basis in the Plantation assets was $1.21 million. On his 1988 individual return, Tucker claimed a basis of $7.28 million, permitting him to report a capital gain of only $4.47 million. The difference in basis of $6.07 million, taxed at the effective 1988 capital gains rate of 28%, would yield an actual loss well in excess of the district court's $1 million restitution order, even if the assets were sold by Tucker individually, not CMI. 26 Our rough calculation of the apparent tax loss resulting from the fraudulent stepped-up basis led us to consider whether the district court's restitution order should be affirmed as a valid exercise of the court's discretion on this alternative ground. But we conclude that would be inappropriate. First, despite the apparent simplicity of focusing exclusively on the fraudulent stepped-up basis, the government has never asserted this theory of tax loss, so its simplicity may well be more apparent than real. Second, Tucker should have an opportunity to challenge this theory with a full tax analysis on a proper record. 27 Accordingly, the judgment of the district court is reversed and the case is remanded for further sentencing proceedings not inconsistent with this opinion. The government's motion to supplement the record on appeal is denied.