- 16 -
tax for fraud under section 6653(b)(1) on account of the
taxpayer’s failure to report income from sales of heroin
notwithstanding that the Commissioner, who bore the burden of
proof because of the claim of fraud, had failed to show that the
taxpayer’s costs of goods sold and deductible expenses did not
exceed his receipts from those sales. We pointed out that, in a
merchandising business, gross receipts from sales must be reduced
by cost of goods sold to determine gross income from sales. Sec.
1.61-3(a), Income Tax Regs. Indeed, we stated that an
underpayment of tax resulting from unreported gross receipts is
only possible if those unreported gross receipts are not exceeded
by the cost of the goods sold and deductible expenses. We
continued:
Nevertheless, even in criminal tax evasion cases,
where the Government bears the greater burden of proof
beyond a reasonable doubt, it is well settled--“that
evidence of unexplained receipts shifts to the taxpayer
the burden of coming forward with evidence as to the
amount of offsetting expenses, if any.” Siravo v.
United States, 377 F.2d 469, 473 (1st Cir. 1967).
Accord, e.g., United States v. Garguilo, 554 F.2d 59,
62 (2d Cir. 1977); Elwert v. United States, 231 F.2d
928, 933 (9th Cir. 1956); United States v. Link, 202
F.2d 592, 593 (3d Cir. 1953); United States v. Bender,
218 F.2d 869, 871 (7th Cir. 1955); Bourque v.
Commissioner, T.C. Memo. 1980-286 (applying the general
rule to cost of goods sold). * * *
We explained that the settled rule was based on the rationale
that, in the case of a taxpayer who has not entirely omitted
receipts from an activity from his return, it can be presumed
that the taxpayer, desiring to minimize his tax, has reported all
Page: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 NextLast modified: May 25, 2011