William C. Siravo v. United States
377 F.2d 469, 1967 U.S. App. LEXIS 6369, 19 A.F.T.R.2d (RIA) 1469 (1967)
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Rule of Law:
A tax return that omits a material source of income is not 'true and correct' under 26 U.S.C. § 7206(1), and the taxpayer's declaration under penalty of perjury that the return is complete serves as the requisite false statement. In a prosecution for willful failure to file, evidence of unexplained gross receipts shifts the burden of production to the taxpayer to come forward with evidence of any offsetting costs or expenses.
Facts:
- From 1958 to 1960, defendant Siravo filed individual income tax returns.
- On these returns, Siravo only reported wage income from his employment at Siravo Motor Sales, which did not exceed $7,500 in any year.
- During the same period, Siravo operated a jewelry assembly business, Trans-Lux Jewelry Co., which generated substantial gross receipts: $22,242.83 in 1958, $28,976.22 in 1959, and $54,319.47 in 1960.
- Siravo did not report any of this business income on his tax returns, nor did he file the required Schedule C to account for business profit or loss.
- Siravo signed each return under a declaration, subject to the penalties of perjury, that the return was 'true, correct, and complete'.
- In 1961, Siravo's business received gross receipts of $71,362.73.
- Siravo failed to file any income tax return for the 1961 tax year.
Procedural Posture:
- Defendant Siravo was charged in a federal district court on three counts of willfully making and subscribing false tax returns for 1958, 1959, and 1960, and one count of willfully failing to file a tax return for 1961.
- Following a jury trial, Siravo was convicted on all four counts.
- Siravo, as the appellant, appealed the judgments of conviction to the United States Court of Appeals for the First Circuit.
- The United States is the appellee in this appeal.
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Issue:
Does a taxpayer violate 26 U.S.C. § 7206(1) by knowingly and wilfully omitting a material source of income from a tax return, which is signed under penalty of perjury as 'true and correct', even without making an affirmative numerical misstatement?
Opinions:
Majority - Coffin, Circuit Judge.
Yes. A tax return that omits material items necessary to the computation of income is not 'true and correct' within the meaning of 26 U.S.C. § 7206(1). The court reasoned that the terms 'true' and 'correct' together imply that a document must be both accurate and complete. If an affirmative false statement is required for a perjury-type offense, it is supplied by the taxpayer's declaration under oath that the return is true and correct when the taxpayer knows it is materially incomplete. The court rejected the argument that this would create an overlap with the misdemeanor offense of failing to supply information, stating that Congress can create a felony for falsely swearing that a partial return is a complete one. This interpretation is necessary to effectuate the self-assessing nature of the tax system and prevent taxpayers from evading liability by telling 'half truths'. The court also held that on the failure-to-file charge, once the government presented evidence of unexplained gross receipts, the burden of production shifted to the defendant to provide evidence of offsetting business costs.
Analysis:
This decision is significant for broadening the scope of tax perjury under § 7206(1) to include material omissions, not just affirmative false statements. It establishes that signing a tax return under penalty of perjury is an assertion of its completeness, making the knowing omission of an entire income stream a prosecutable felony. Furthermore, the case clarifies the prosecutorial burden in failure-to-file cases involving business income. By placing the burden of producing evidence of costs on the taxpayer—the party with sole access to that information—the court makes it far more practical for the government to prosecute individuals who fail to file returns for their businesses.
