United States v. Sun Myung Moon and Takeru Kamiyama
52 A.F.T.R.2d (RIA) 6026, 718 F.2d 1210, 14 Fed. R. Serv. 133 (1983)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Income generated from assets held in an individual's name and under their personal control is taxable to that individual, even if they are a religious leader who claims to be holding the assets beneficially for their church, especially where evidence of a formal trust is lacking and documents supporting the trust claim are fraudulent.
Facts:
- In March 1973, Reverend Sun Myung Moon opened a personal checking account and a savings account at Chase Manhattan Bank.
- Over the next three years, more than $1.7 million, mostly in cash, was deposited into these accounts, which were in Moon's name.
- A substantial portion of these funds was moved into high-yielding time deposits, also held in Moon's name, which earned over $100,000 in interest between 1973 and 1975.
- In 1973, Moon was issued $50,000 worth of stock in Tong II Enterprises, Inc., a corporation he co-founded.
- Moon did not report the interest income from the Chase accounts or the value of the Tong II stock on his personal federal income tax returns for 1973, 1974, and 1975.
- Moon used funds from the Chase accounts to make large loans to the Holy Spirit Association for Unification World Christianity (HSA-UWC), which were recorded on the church's books as personal loans from Moon.
- To support the claim that the funds were held in trust, subordinates of Moon created backdated documents, including loan agreements and a ledger of supposed contributions, which were later proven to be fraudulent.
Procedural Posture:
- Reverend Sun Myung Moon and Takeru Kamiyama were charged in a multi-count indictment in the United States District Court for the Southern District of New York, a federal trial court.
- The indictment charged Moon with filing false federal income tax returns and conspiracy, and Kamiyama with conspiracy, aiding and abetting, obstruction of justice, and perjury.
- The defendants' request for a non-jury bench trial was denied after the government refused to consent.
- Following a six-week trial, a jury returned guilty verdicts against both defendants on all counts on May 18, 1982.
- The district court denied the defendants' post-trial motion for a new trial, which alleged juror misconduct.
- Moon and Kamiyama, as appellants, appealed their convictions and the denial of their post-trial motion to the United States Court of Appeals for the Second Circuit.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a religious leader's personal control over bank accounts and stock held in his name, funded by follower contributions, make the income from those assets taxable to him personally, despite his claim that he holds them in a beneficial trust for his church?
Opinions:
Majority - Cardamone, J.
Yes, the income from assets held in a religious leader's name and under his personal control is taxable to him personally when the evidence supports personal ownership over a trust relationship. The government presented sufficient evidence for a jury to find that Reverend Moon owned the Chase accounts and Tong II stock personally. This evidence included the assets being held in Moon's name, his personal control over them, his use of the funds for transactions recorded as personal loans to his church, and the fact that documents produced by the defense to prove a trust relationship were found to be fraudulently backdated. The court rejected First Amendment arguments that it could not inquire into the church's financial activities in a criminal prosecution, stating that a religious leader's spiritual identity is separate from his legal identity as a taxpayer. The court also found the jury instructions on the law of trusts were adequate and not prejudicial, and it upheld the denial of a bench trial and rejected claims of selective prosecution.
Dissenting - Oakes, J.
No, the income should not be considered taxable to him personally because the trial was tainted by erroneous and prejudicial jury instructions on the central issue of beneficial ownership. The dissent argues that the trial court committed plain error in its charge on the law of trusts. The instructions incorrectly required a 'clear and unambiguous' intent to create a charitable trust, which is a higher standard than New York law requires. The charge also improperly suggested that the lack of a formal church structure weighed against the existence of a trust and included an 'if-then' formulation that impermissibly shifted the burden of proof to the defendant to prove the assets belonged to the church. Because the trust issue was the only critical factual question in the case, these instructional errors prevented a fair trial and warranted a reversal of the conviction.
Analysis:
This case establishes that religious leaders are subject to the same tax laws as any other individual and cannot use their spiritual status to shield personal income from taxation. The court's decision underscores the critical importance of maintaining a formal separation between a leader's personal assets and the assets of their religious organization. By rejecting the informal trust defense in the face of fraudulent documentation and personal control, the ruling serves as a precedent against using religious affiliation to obscure the beneficial ownership of assets for tax purposes. It solidifies the principle that courts may inquire into a church's financial activities to enforce neutral criminal statutes without violating the First Amendment.
Unlock the full brief for United States v. Sun Myung Moon and Takeru Kamiyama