Court Opinion

ID: 9482009
Source: CourtListenerOpinion
Date Created: 2023-08-05 08:37:46.243544+00
Date Added: 2024-06-11T17:48:42.731706
License: Public Domain

FLAUM, Circuit Judge,
concurring.
The majority has persuasively demonstrated why Leigh Ann Conley’s conviction is infirm and why the district court abused its discretion in excluding the Kritzik letters. I therefore join that portion of its opinion.
I further agree that Lynnette Harris’ conviction must be reversed as well. To convict Harris for violating § 7201 and § 7203 of the Internal Revenue Code, the government had to establish beyond a reasonable doubt that Harris had a legal duty to file a tax return. See United States v. Foster, 789 F.2d 457, 460 (7th Cir.1986); United States v. Dack, 747 F.2d 1172, 1174 (7th Cir.1984); United States v. Voorhies, 658 F.2d 710, 713 (9th Cir.1981). It failed, in my view, to meet this burden; no reasonable juror could have found beyond a reasonable doubt that Kritzik’s payments to Harris were income rather than gifts.
I am troubled, however, by the path the majority takes to reach this result, and thus concur only in the court’s judgment with respect to the reversal of Harris’ conviction. I part company with the majority when it distills from our gift/income jurisprudence a rule that would tax only the most base type of cash-for-sex exchange and categorically exempt from tax liability all other transfers of money and property to so-called mistresses or companions. Af*1136ter citing several decisions of the tax court, the majority concludes that a person “is entitled to treat cash and property received from a lover as gifts, as long as the relationship consists of something more than specific payments for specific sessions of sex.” Ante at 1133-1134. I respectfully disagree. In Commissioner v. Duberstein, 363 U.S. 278, 80 S.Ct. 1190, 4 L.Ed.2d 1218 (1960), the font of our analysis of the gift/income distinction, the Supreme Court expressly eschewed the type of categorical, rule-bound analysis propounded by the majority. See id. at 289, 80 S.Ct. at 1198 (“while the principles urged by the Government may, in nonabsolute form as crystalli-zations of experience, prove persuasive to the trier of facts in a particular case, neither they, nor any more detailed statement than has been made, can be laid down as a matter of law”). The Court counseled instead that in distinguishing gifts from income we should engage in a case-by-case analysis, the touchstone of which is “the ‘transferor’s intention.’ ” Id. at 285-86, 80 S.Ct. at 1197 (quoting Bogardus v. Commissioner, 302 U.S. 34, 43, 58 S.Ct. 61, 65, 82 L.Ed. 32 (1937)). After reading Duberstein, a reasonable taxpayer would conclude that payments from a lover were taxable as income if they were made “in return for services rendered” rather than “out of affection, respect, admiration, charity or like impulses.” Id. at 285, 80 S.Ct. at 1197 (quoting Robertson v. United States, 343 U.S. 711, 714, 72 S.Ct. 994, 996, 96 L.Ed. 1237 (1952)).
Viewed in this light, I suggest that the bulk of the tax court cases cited by the majority offer no more than that the transferors in those particular cases harbored a donative intent. In my view, one cannot convincingly fashion a rule of law of general application from such a series of necessarily fact-intensive inquiries. That other taxpayers were found to have a donative intent does not bear on whether Harris had a duty to pay taxes on the monies she received from Kritzik. Whether Harris had such a duty is, under Duberstein, a question of Kritzik’s intent, a question whose answer can be found only upon analysis of her particular circumstances. If Kritzik harbored a donative intent, then Harris was not obligated to pay taxes on his largess; if, however, he did not — if he was paying Harris for her services — then she was under a duty to do so.
It appears that the majority at once agrees and disagrees with this analysis. The majority acknowledges, ante at 1132, that Duberstein’s principles “though general, provide a clear answer to many cases involving the gift versus income distinction and can be the basis for civil as well as criminal prosecutions in such cases.” The majority is “equally certain,” however, that “Duberstein provides no ready answer to the taxability of transfers of money to a mistress in the context of a long-term relationship.” Ante at 1132. It takes this view because tax court cases have characterized similar payments made to other mistresses and companions as gifts rather than income. While apparently nodding to Duberstein, the majority contends that the state of the law is such that no reasonable mistress or companion could ever, with sufficient certainty, conclude that the payments she received were income rather than gifts and hence taxable.
How the majority can agree that the focal point of our inquiry is properly the transferor’s intent and yet establish what amounts to a rule of law effectively preempting such inquiries I find perplexing. Putting aside this problem, I am unpersuaded by the majority’s argument that Duberstein’s guidance is categorically no guidance at all. Consider the following example. A approaches B and offers to spend time with him, accompany him to social events, and provide him with sexual favors for the next year if B gives her an apartment, a car, and a stipend of $5,000 a month. B agrees to A’s terms. According to the majority, because this example involves a transfer of money to a “mistress in the context of a long-term relationship”, A could never be charged with criminal tax evasion if she chose not to pay taxes on B’s stipend. I find this hard to accept; what A receives from B is clearly income as it is “in return for services rendered.” 363 U.S. at 285, 80 S.Ct. at 1197. To be sure, there *1137will be situations — like the case before us— where the evidence is insufficient to support a finding that the transferor harbored a “cash for services” intent; in such cases, criminal prosecutions for willful tax evasion will indeed be impossible as a matter of law. That fact does not, however, condemn as overly vague the analysis itself.
I am thus prompted to find Harris’ conviction infirm because of the relative scantiness of the record before us, not because mistresses are categorically exempt from taxation on the largess they receive. Simply put, the record before us does not establish beyond a reasonable doubt that Kritzik’s intent was to pay Harris for her services, rather than out of affection or charitable impulse. As the majority relates, the record does contain evidence showing that Harris thought their relationship to be of the “cash-for-services” kind. Such evidence is, in my view, probative — to some degree — of Kritzik’s intent. See Olk v. United States, 536 F.2d 876, 879 (9th Cir.1976) (“The manner in which a [transferee] may regard [that which is transferred] is, of course, not the touchstone for determining whether the receipt is excluda-ble from gross income. It is, however, a reasonable and relevant inference.”). But not sufficiently so to support a criminal conviction. Absent even a scintilla of direct evidence of Kritzik’s intent, I cannot conclude, on the basis of Harris’ perception of the relationship alone, that the government proved the nature of Kritzik’s payments to be income rather than gift beyond a reasonable doubt.