Opinion ID: 563204
Heading Depth: 2
Heading Rank: 3

Heading: Refusal To Instruct the Jury on the Legal Definition of Sham

Text: 42 Yet again, appellants have invoked their Frank Lyon/Rice's Toyota World interpretation of sham to insist that the district court erred in not giving a jury instruction to that effect as to the conspiracy count (Count 1), but chose instead to give the following instruction: 43 Now, when we look at the object of the conspiracy to obstruct the collection of Federal income taxes, using and causing to be used sham trust entities known as UBOs to conceal taxable income and assets from the IRS, as is stated on page 2 of paragraph eight ... the utilization of numerous sham trusts as stated in paragraph nine and on page 2, and the promotion and selling of [a] sham trust scheme as a device to allow individuals not only to evade Federal income tax liabilities but also to escape detection for so doing as stated in paragraph 29 on page 8. 44 Simply put, if after considering all the evidence you find the Government has proved beyond a reasonable doubt that the unincorporated business organization trust being sold, promoted, used and caused to be used by the defendants were a scheme to be used by the individuals as a device for evasion of their income tax liabilities and were not for legitimate purposes as contended by the defendants, then you will have found that the use of the UBOs as promoted and sold by the defendants were a sham used for the object and as a means and methods of impeding and obstructing the Internal Revenue Service in the ascertainment and collection of Federal income taxes. 45 (Emphasis added.) We have emphasized the final portion of the district court's instruction on the definition of sham to highlight again the distinction between the UBO as sham (Frank Lyon ) and the use of the UBO as sham (the instant case). Giving no consideration to such an important distinction, the appellants have continued to urge that the instruction as given was flawed because it 1) made no reference to a non-business purpose and 2) made no reference to economic substance, the two prongs of the Frank Lyon sham test. 46 A trial court is not required to give a requested instruction unless there is an evidentiary basis for the instruction and the instruction correctly states the law. United States v. Dornhofer, 859 F.2d 1195, 1199 (4th Cir.1988), cert. denied, 490 U.S. 1005, 109 S.Ct. 1639, 104 L.Ed.2d 155 (1989). The instruction rejected by the district court provided in part that to find appellants guilty, the jury would have to find that the UBO at issue is, in fact, a sham. As we have previously shown, that simply was not the law setting forth what the government had to prove. 47 Had appellants chosen to quote the remainder of the district court's instruction regarding how the UBO's were used illegally, their Frank Lyon argument would all but vanish. The district court cogently set forth the two essential elements of tax evasion schemes: 1) whether the taxpayer intended to escape taxes or wages on his earnings by assigning, transferring, selling, or giving away some or all of his future earnings to another individual or entity, and 2) whether the taxpayer continued to maintain dominion and control over his assets after transfer to such entity. It was a violation of well-established principles of tax law that provided the basis of appellants' convictions, rendering inappropriate the appellants' proposed jury instruction. 48