Opinion ID: 463769
Heading Depth: 1
Heading Rank: 2

Heading: Challenges to the Jury Instructions on the Definition of Income

Text: 32 Curtis next objects to two of the instructions given by the trial court. The first of the two instructions, number 20, is taken from Davis v. United States, supra. It reads: 33 Income received from any source constitutes taxable income when its recipient has such control over it that, as a practical matter, he derives readily realizable economic value from it, and that this occurs when cash is received by an individual in a manner which allows him freedom to dispose of it or use it at will. 34 Defendant argues that instruction 20 contradicts instruction 19, which describes the calculations of gross income, adjusted gross income, and taxable income. 1 Curtis contends that instruction 20 should not say that income received from any source constitutes taxable income. Instead, instruction 19 correctly states that taxable income is the sum remaining after deductions and exemptions are subtracted from adjusted gross income. 35 Curtis also argues that instruction 20 contradicts instruction 21, which states that loans do not constitute income. 2 He refers specifically to the last portion of instruction 20, which states that taxable income occurs when cash is received by an individual in a manner which allows him freedom to dispose of it or use it at will. Curtis maintains that instruction 20 labels every receipt of unrestricted cash, including loans, as income. This allegedly contradicts the statement in instruction 21 that loans are not income. 36 In reviewing a trial judge's instruction to a jury, we must look at the charge as a whole and we will not reverse unless the instruction as given had a tendency to confuse or mislead the jury. Farace v. Independent Fire Ins. Co., 699 F.2d 204, 297 (5th Cir.1983) (citations omitted); Carruba v. Transit Casualty Co., 443 F.2d 260, 264 (6th Cir.1971). After reviewing instruction 20 in the context of its surrounding instructions, the court concludes that it must be affirmed. The instructions, taken as a whole, are not misleading or otherwise prejudicial. Instruction 21 clearly states that interest-free, undocumented loans from corporation to shareholder are properly excluded from the gross income of the shareholder, and instruction 20 does not contradict or obscure this instruction. While the trial court might have been more careful about its use of the term taxable income, it did not commit reversible error, for the jury was flatly given a correct statement of the law as it relates to receipt of loans. 37 Curtis also challenges the following instruction:The funds from the Lexington Fayette County Urban Detention Center in question were received in the first instance by The Meat Shop, Inc., of which the defendant, James C. Curtis, was president and sole stockholder. You are further instructed that such money received by a corporation is not income to an individual unless the corporation funds are in some way transferred or diverted to the individual, and become property over which he exercises dominion and control and treated as his own, to the exclusion of any interest therein by the corporation. 38 If you find beyond a reasonable doubt that James C. Curtis, as the sole owner of The Meat Shop, Inc., diverted funds of that corporation to himself personally, and exercised control over them and treated them as his own, that would constitute taxable income that he was required by law to include in his income tax return. 39 Defendant once more objects to the instruction on the grounds that it tells the jury to find taxable income whenever a person receives cash over which he has control. Again, Curtis' argument must fail. The challenged instruction states that the jury may conclude that Curtis received income from the Meat Shop only if he held the money to the exclusion of any interest therein by the corporation. This phrase comports with the statement in instruction 21 that Curtis did not receive income from the Meat Shop if the money was a corporation loan. The court concludes once again that the instructions, read as a whole, did not prejudice Curtis and should be affirmed.