Opinion ID: 1253249
Heading Depth: 3
Heading Rank: 1

Heading: The Existence of a Substantial Tax Debt

Text: With respect to Counts 1, 3, and 4, Josephberg contends, inter alia, that the government's evidence was legally insufficient to support a finding of substantial tax due. Josephberg conceded in the district court ( see Defendant's Requests for Jury Instructions at 16), that the IRS tax assessment certificates for 1977-1985 introduced by the government, reflecting relevant information pertaining to his personal returns and the balance-due notices sent to him, constituted prima facie evidence that Josephberg had a substantial tax debt. See generally United States v. Silkman, 156 F.3d 833, 835-36 (8th Cir.1998); id. at 836 (The formal assessments were prima facie evidence of tax deficiencies.); United States v. Voorhies, 658 F.2d 710, 715 (9th Cir.1981) (A valid assessment is one method of establishing tax liability....); United States v. England, 347 F.2d 425, 430 n. 10 (7th Cir.1965) (approving jury charge that included the instruction that an assessment is prima facie correct). On appeal, Josephberg argues that the evidence was insufficient because he mounted a strong challenge to the certificates on the ground that the assessments against him were based on the disallowance of his deductions of his shares of the losses of the 139 tax shelter partnerships at issue and that the government did not introduce evidence of audits and adjustments made to any of the partnerships themselves. (Josephberg brief on appeal at 61.) This contention is meritless, amounting essentially to an argument as to the weight of the evidence, which, as discussed in Part II.A. above, is not a ground for reversal on appeal. As Josephberg's brief concedes, if IRS certificates of assessments are challenged, then the issue is one for the jury. ( Id. ) Here, the evidence was ample to permit a rational juror to conclude that Josephberg had a substantial tax debt. First, the certificates of assessments themselves showed that before the end of 1996, the year in which the IRS collection efforts began, Josephberg had tax debts, including interest and penalties, of, for example, more than $1.3 million for the year 1979 and more than $1 million for the year 1980. By the end of 1997, Josephberg's tax debt, including interest and penalties, for 1985  the year into which all of the Cralin tax-shelter-deferred gains were ultimately rolled  was more than $8 million. ( See GX 164-C, GX 164-D, GX 164-I.) Second, although Josephberg argues that the government could not prove his tax deficiency on the basis of the certificates alone (Josephberg brief on appeal at 60), we need not address his legal premise because the government did not in fact rest its case on the certificates alone. The government also introduced the notices of deficiency sent to Josephberg informing him of the amounts due ( see, e.g., GX 152, GX 153, GX 155, GX 156, GX 159); these notices included statements with respect to specified tax shelter partnerships that  the partnership is not entitled to the claimed losses because it has not been shown that the partners or the partnership entered into the transactions primarily for profit (e.g., GX 152 (emphasis added)). In addition, the government introduced the tax court judgments rejecting Josephberg's challenges to the assessments for the years 1977-1980 and 1985. ( See GX 400-B, GX 400-D.) Although Josephberg argues that the Tax Court judgments against [him] were not on the merits (Josephberg brief on appeal at 46), we disagree. The tax court actions were brought by Josephberg for redetermination of the deficiencies calculated by the IRS; he had the initial burden of showing that the IRS calculations were erroneous, see Tax Court Rule 142(a); see also 26 U.S.C. § 7491(a)(1); and he plainly failed to carry that burden. As described in Part I.B. above, in his action challenging the 1977-1980 calculations, Josephberg failed to respond  or object  to the IRS's requests for factual admissions, and the facts set forth in the IRS requests were deemed admission[s] of the facts set forth in the request [s] for admissions, Tax Court Judgment I, at 1; see id. at 1-2. On the basis of those admissions, the tax court granted summary judgment against Josephberg  plainly a merits decision. In his action challenging the 1985 calculations, Josephberg and his attorneys failed to appear when the case was called for trial, and the action was dismissed for lack of prosecution. Tax Court Judgment II. The Internal Revenue Code (or Code) provides that [i]f a petition for a redetermination of a deficiency has been filed by the taxpayer, a decision of the Tax Court dismissing the proceeding shall be considered as its decision that the deficiency is the amount determined by the Secretary.  26 U.S.C. § 7459(d) (emphasis added). Thus, the tax court decision in Josephberg's action challenging the 1985 calculations was likewise a ruling on the merits. In sum, despite the absence of direct proof as to the audits of the tax shelter partnerships themselves, the evidence viewed as a whole was ample to permit a rational juror to find beyond a reasonable doubt that Josephberg had a substantial tax debt.