13.00 AID OR ASSIST FALSE OR FRAUDULENT DOCUMENT

Updated May 2001

13.01 STATUTORY LANGUAGE:  26 U.S.C. § 7206(2)

13.02 GENERALLY

13.03 ELEMENTS OF SECTION 7206(2) OFFENSE

13.04 AIDING AND ASSISTING
13.04[1] Persons Liable
13.04[2] Signing of Document Not Required
13.04[3] Knowledge of Taxpayer
13.04[4] Filing of Documents

13.05 FALSE MATERIAL MATTER
13.05[1] Generally
13.05[2] Examples:  False "Material Matter"

13.06 WILLFULNESS

13.07 CASE EXAMPLES
13.07[1] Return Preparers
13.07[2] Sham Circular Financing Transactions
13.07[3] Inflated Values
13.07[4] Political Contributions Deducted as Business Expenses
13.07[5] Winning Racetrack Tickets -- Not Cashed by True Owner
13.07[6] Payoffs to Union Officials Reflected as Commissions and Repairs

13.08 VENUE

13.09 STATUTE OF LIMITATIONS


      13.01  STATUTORY LANGUAGE:  26 U.S.C. § 7206(2)

      §7206.  Fraud and false statements

      Any person who . . .

            (2) Aid or assistance. -- Willfully aids or assists
      in, or procures, counsels, or advises the preparation or presentation
      under, or in connection with any matter arising under, the internal
      revenue laws, of a return, affidavit, claim, or other document, which is
      fraudulent or is false as to any material matter, whether or not such
      falsity or fraud is with the knowledge or consent of the person authorized
      or required to present such return, affidavit, claim, or document; . . . .
      

      shall be guilty of a felony and, upon conviction thereof, shall be fined*
      not more than $100,000 ($500,000 in the case of a corporation), or
      imprisoned not more than 3 years, or both, together with the costs of
      prosecution.

            * For offenses committed after December 31, 1984, the Criminal Fine
      Enforcement Act of 1984, 18 U.S.C. § 3612, [FN1] increased the
      maximum permissible fines for both misdemeanors and felonies.  For the
      felony offenses set forth in section 7206, the maximum permissible fine
      for offenses committed after December 31, 1984, is at least $250,000 for
      individuals and $500,000 for corporations.  Alternatively, if the offense
      has resulted in pecuniary gain to the defendant or pecuniary loss to
      another person, the defendant may be fined not more than the greater of
      twice the gross gain or twice the gross loss.

      FN 1. Changed to 18 U.S.C. § 3571, commencing November 1, 1986.

                        
                        13.02  GENERALLY

      Section 7206(2) has been described as the Internal Revenue Code's "aiding
and abetting" provision.  United States v. Williams, 644 F.2d 696,
701 (8th Cir. 1981).  It is frequently used to prosecute individuals who advise
or otherwise assist in the preparation or presentation of false documents,
e.g., fraudulent tax return preparers.  However, this statute is not
limited to preparers, but applies to anyone who causes a false return to be
filed.  While frequently the false document will be a tax return or information
return, any document required or authorized to be filed with the Internal Revenue
Service can give rise to the offense.

      The constitutionality of section 7206(2) has been upheld against challenges
based on the First Amendment free speech clause and the Fifth Amendment due
process clause.  United States v. Knapp, 25 F.3d 451, 457 (7th Cir.
1994)(rejecting First Amendment claim by protester tax counselor); United
States v. Rowlee, 899 F.2d 1275, 1278-79 (2d Cir. 1990)("The consensus
of this and every other circuit is that liability for a false or fraudulent tax
return cannot be avoided by invoking the First Amendment."); United States
v. Cochrane, 985 F.2d 1027, 1031 (9th Cir. 1993) (finding statute not
unconstitutionally vague); United States v. Damon, 676 F.2d 1060
(5th Cir. 1982) (same); United States v. Buttorff, 572 F.2d 619,
624 (8th Cir. 1978) (First Amendment).  But cf.  United States v.
Dahlstrom, 713 F.2d 1423, 1428 (9th Cir. 1983)(reversing § 7206(2)
conviction where advice provided on unsettled point of law).

      Because similar concepts apply to both section 7206(2) and section 7206(1)
violations, reference should be made to the discussion of section 7206(1) in
Section 12.00, supra.

           
           13.03  ELEMENTS OF SECTION 7206(2) OFFENSE

      To establish a section 7206(2) offense, the government must prove the
following elements beyond a reasonable doubt:

      1.    Defendant aided or assisted in, procured, counseled, or advised the
            preparation or presentation of a document in connection with a
            matter arising under the internal revenue laws;

      2.    The document was false as to a material matter;

      3.    The act of the defendant was willful.

United States v. Aramony, 88 F.3d 1369, 1382 (4th Cir. 1996);
United States v. Klausner, 80 F.3d 55, 58 (2d. Cir. 1996);
United States v. Sassak, 881 F.2d 276, 278 (6th Cir. 1989);
United States v. Coveney, 995 F.2d 578, 588 (5th Cir. 1993);  
United States v. Hooks, 848 F.2d 785, 788-89 (7th Cir. 1988);
United States v. Crum, 529 F.2d 1380, 1382 n.2 (9th Cir. 1976).

                       
                       13.04  AIDING AND ASSISTING
                       

13.04[1]  Persons Liable

      The purpose of the statute is to make it a crime for one to knowingly
assist another in preparation and presentation of a false and fraudulent income
tax return.  United States v. Jackson, 452 F.2d 144, 147 (7th Cir.
1971).  Section 7206(2) and its predecessor statutes have been directed against
fraudulent tax return preparers since as early as 1939.  In United States
v. Kelley 105 F.2d 912 (2d Cir. 1939), Justice Learned Hand described the
statutory predecessor of section 7206(2):

      The purpose was very plainly to reach the advisers of taxpayers who got up
      their returns, and who might wish to keep down the taxes because of the
      credit they would get with their principals, who might be altogether
      innocent.

Kelley, 105 F.2d at 917.

      Although directed against return preparers, section 7206(2) is not limited
to return preparers.  The argument that section 7206(2) "is applicable only to
accountants, bookkeepers, tax consultants, or preparers who actually prepare the
tax returns" was flatly rejected by the Third Circuit in United States v.
McCrane, 527 F.2d 906, 913 (3d Cir. 1975), vacated and remanded on
another issue, 427 U.S. 909, reaff'd on section 7206(2) counts, vacated
and remanded on other counts, 547 F.2d 204 (3d Cir. 1976).  The statute "has
a broad sweep, and makes all forms of willful assistance in preparing a false
return an offense."  United States v. Hooks, 848 F.2d 785, 791
(7th Cir. 1988); accord United States v. Coveney, 995 F.2d 578, 588
(5th Cir. 1993).  Courts have held that anyone who causes a false return to be
filed or furnishes information which leads to the filing of a false return can
be guilty of violating section 7206(2).  See, e.g., United States v.
Clark, 139 F.3d 485, 489-90 (5th Cir.) (rejecting insufficiency claim by
pilot connection members who counseled taxpayers to claim excess exemptions on
Forms W-4), cert. denied, 525 U.S. 899 (1998).  The question is whether
the defendant consciously did something that led to the filing of a false return.

      The defendant in United States v. Crum, 529 F.2d 1380
(9th Cir. 1976), was involved in a scheme designed to furnish high income doctors
with backdated beaver purchase contracts for use in obtaining fraudulent
depreciation deductions.  Crum, who bred and sold beavers, did not participate
in the preparation of the returns, but he did attend two meetings with doctors
where the scheme was discussed.  He also signed two backdated beaver purchase
contracts, one of which was signed to exhibit to an IRS agent. 
Crum, 529 F.2d at 1381-82.  In affirming Crum's conviction under
section 7206(2), the court described the following jury instruction as "a proper
statement of the law":

      In order to aid and abet another to commit a crime it is necessary that
      the accused wilfully associate [sic] himself in some way with the criminal
      venture, and wilfully participates in it as he would in something he
      wishes to bring about; that is to say, that he wilfully seeks by some act
      or omission of his to make the criminal venture succeed.

      In making a determination as to whether the defendants aided or assisted
      in or procured or advised the preparation for filing of false income tax
      returns, the fact that the defendants did not sign the income tax returns
      in question is not material to your consideration.

Crum, 529 F.2d at 1382-83 n.4.

      Accordingly, the court in Crum rejected the contention that
section 7206(2) applies only to preparers of tax returns.  "The nub of the matter
is that they aided and abetted if they consciously were parties to the
concealment of [a taxable business] interest . . . ."  Crum,
529 F.2d at 1382 (citing United States v. Johnson, 319 U.S. 503,
518 (1943)).

      In United States v. Maius, 378 F.2d 716 (6th Cir. 1967), the
defendant was convicted, even though he did not participate in the actual
preparation of the false return.  Maius managed a casino's bar and restaurant. 
As part of his duties, he prepared false daily sheets of the casino gambling loss
collections.  The figures were entered into the casino books and ultimately
reflected on its income tax returns.  The defendant's knowledge that the records
would be used in preparing the tax returns was held sufficient to sustain his
conviction.  Maius, 378 F.2d at 718.  

      In United States v. Hooks, 848 F.2d 785 (7th Cir. 1988), the
defendant withheld $375,000 worth of bearer bonds from the bank administering his
deceased father-in-law's $8 million estate.  Hooks, 848 F.2d at
787.  He then cashed the bonds through a transaction structured to conceal his
connection with the sale.  As a result, the value of the bonds was not included
in the federal estate tax return prepared by the bank, and $96,564.58 in estate
tax was evaded.  The court found that the defendant's activities resulted in the
filing of the false return.  Even though he did not actually prepare the returns
and the preparer (the bank) did not know of the fraud, the defendant had violated
section 7206(2).  Hooks, 848 F.2d at 791. 

      In United States v. McCrane, 527 F.2d 906 (3d Cir. 1975), the
defendant solicited political contributions as finance chairman for a
gubernatorial candidate.  The basic scheme was that the defendant advised donors
to the political campaign that he would have false invoices for advertising
services sent to them so they could deduct the disguised contributions as
business expenses.  Even though the defendant did not assist in the preparation
of the two false returns for which he was convicted, he "was convicted on
evidence that he assisted certain taxpayers by providing false invoices as
documentation of business expenses."  McCrane, 527 F.2d at 913.

      United States v. Wolfson, 573 F.2d 216 (5th Cir. 1978),
provides another example of what might be termed the underlying causation theory
that can support a section 7206(2) violation.  Wolfson was charged with supplying
inflated appraisals to persons who donated their yachts to a university.  The
taxpayers subsequently claimed a charitable deduction on their returns based on
the inflated appraisals.  Although Wolfson's conviction was reversed on
evidentiary grounds, the court rejected his contention that his actions were not
within section 7206(2) because he did not actually prepare a return but rather
provided an appraisal which the taxpayer or his accountant used to prepare a
return.  Wolfson, 573 F.2d at 225.  The court concluded:

      Wolfson does not have to sign or prepare the return to be amenable to
      prosecution.  If it is proved on remand that he knowingly gave a false
      appraisal with the expectation it would be used by the donor in taking a
      charitable deduction on a tax return, it would constitute a crime.

Wolfson, 573 F.2d at 225.


13.04[2]  Signing of Document Not Required

      Section 7206(2) prohibits the aiding or assisting in, procuring,
counseling, or advising the preparation or presentation of a false document.  The
fact that the defendant does not actually sign or file the document itself is not
material.  United States v. Coveney, 995 F.2d 578, 588 (5th Cir.
1993)(observing that "[a] person need not actually sign or prepare a tax return
to aid in its preparation."); United States v. Kellogg, 955 F.2d
1244, 1249 (9th Cir. 1992)(noting in § 7206(2) case that "[i]t is irrelevant
that . . . [the defendant] himself did not file the returns, as long as he helped
to prepare them and they were filed."); United States v. Motley,
940 F.2d 1079, 1084 (7th Cir. 1991)(rejecting insufficiency claim based on the
fact that defendant neither signed nor mailed returns); United States v.
Crum, 529 F.2d 1380, 1382 n.4 (9th Cir. 1976)(approving instruction that
signature of preparer "not material.").

      In this respect, a section 7206(2) prosecution differs from a section
7206(1) prosecution because one of the elements of a 7206(1) violation is
subscribing (signing) any return, statement, or other document under penalties
of perjury.


13.04[3]  Knowledge of Taxpayer

      It is no defense to a 7206(2) prosecution that the taxpayer who submitted
the return was not charged, even when the taxpayer was aware of the falsity of
the return, went along with the scheme, and could have been charged with a
violation.  Any criminal mental state (or lack thereof) on the part of the
taxpayer is not relevant to the legality of a defendant's prosecution pursuant
to section 7206(2).  Accordingly, both a defendant supplying false information
to an entirely innocent taxpayer and a defendant supplying false information to
a taxpayer who willingly accepts and uses the false information are guilty of
violating section 7206(2).  This is clear from the language of section 7206(2)
which provides that it applies "whether or not such falsity or fraud is with the
knowledge or consent of the person authorized or required to present such return,
affidavit, claim, or document . . . ."

      The Fourth Circuit, after surveying other circuit precedent involving
section 7206(2) prosecutions of individuals who did not prepare the false
returns, stated that all that is required for a section 7206(2) prosecution is
that a defendant knowingly participate in providing information which results in
a materially fraudulent tax return, whether the taxpayer is aware of the false
statements. United States v. Nealy, 729 F.2d 961, 963 (4th Cir.
1984); accord United States v. Lefkowitz, 125 F.3d 608, 618 (8th
Cir. 1997) (affirming § 7206(2) conviction against corporation president who
provided false information to accountant which he knew would result in filing of
false return), cert. denied, 523 U.S. (1998); United States v.
Marshall, 92 F.3d 758, 760  (8th Cir. 1996) (noting that the taxpayers
were unaware of inaccuracies while rejecting sufficiency challenge to §
7206(2) conviction); United States v. Motley, 940 F.2d 1079, 1084
(7th Cir. 1991)(rejecting insufficiency claim based on the fact that defendant
neither signed nor mailed returns);  United States v. Hooks,
848 F.2d 785, 791 (7th Cir. 1988) (observing that defendant willfully caused tax
preparer to file a false estate tax return and, therefore, violated section
7206(2), regardless of whether the tax preparer knew of the falsity or fraud).

      Occasionally, the primary witness against the person charged with aiding
and assisting in the preparation or presentation of a false tax return may be the
taxpayer, who may also be culpable.  In order to enable the jury to weigh
properly the credibility of the witness, it may be necessary in such a case to
instruct the jury on the requirements for accomplice testimony.  Hull v.
United States, 324 F.2d 817, 823 (5th Cir. 1963).


13.04[4]  Filing of Documents

      The Ninth Circuit in United States v. Dahlstrom, 713 F.2d
1423, 1429 (9th Cir. 1983), found that the filing of a return is an element of
a section 7206(2) violation.  The dissent argued, however, that "the statute was
clearly intended to reach tax return preparers whether or not the returns they
prepare are ultimately presented."  Dahlstrom, 713 F.2d at 1431.

      The government has similarly argued that an offense under section 7206(2)
may be committed without the filing of a document.  By its terms, the statute
prohibits aiding or advising either the preparation or the presentation of a
fraudulent income tax return.  Therefore, the offense can be committed simply by
counseling a taxpayer to file a false return: nothing in the statute suggests
that the taxpayer must follow that advice and actually file the return in order
for the offense to be committed.  In United States v. Feaster, No.
87-1340, 1988 WL 33814, at *2 (6th Cir. April 15, 1988) (unpublished), the Sixth
Circuit agreed with the government and held that "Dahlstrom is
contrary to the plain language of 26 U.S.C. § 7206(2)."  Cf.
United States v. Monteiro, 871 F.2d 204, 209-10 (1st Cir. 1989)
(court questioned, but did not decide, whether there is a filing requirement for
a section 7206(2) conviction).

      Even though the crime may not be completed until a return is filed, it is
not necessary that the defendant be the same individual who actually filed the
false return, as long as the defendant's willful conduct led to the false filing. 
United States v. Kellogg, 955 F.2d 1244, 1249 (9th Cir. 1992).

      Moreover, the filing requirement is not applicable in situations where the
taxpayer is required to provide information to an intermediary who, in turn, is
required to file a form with the Internal Revenue Service.  In such
circumstances, the offense is complete when the taxpayer has presented the false
document or information to the entity required by law to transmit it to the
Internal Revenue Service.  Monteiro, 871 F.2d at 210-11
(defendant's tax avoidance scheme caused race track to report wrong persons as
winners on the track's Forms 1099); United States v. Cutler,
948 F.2d 691, 694 (10th Cir. 1991) (defendant provided false information to stock
brokerage firm which caused the firm to file Forms 1099-B containing false
statements).

                  
                  13.05  FALSE MATERIAL MATTER

13.05[1]  Generally

      As noted in Section 12.08, the law of materiality has changed such that
materiality is now held to be a jury question in section 7206 prosecutions by the
majority of circuits, in the wake of United States v. Gaudin, 515
U.S. 506 (1995).  As a result, it may now be more difficult for the government
to prevail in a section 7206(2) prosecution with no proof of a tax deficiency. 
For a complete discussion, refer to section 12.08.


13.05[2]  Examples:  False "Material Matter"

      The following are pre-Gaudin examples of matters found to be
materially false by courts.  Such law should still be consulted for issues such
as sufficiency of the evidence.

      In United States v. Helmsley, 941 F.2d 71 (2d Cir. 1991), the
defendant reported certain payments as ordinary business expenses which the
government argued were actually nondeductible constructive dividends to defendant
and her husband.  The testimony of the government's expert witness on cross-
examination, however, implied that the payments were a form of salary
compensation to the Helmsleys which were properly deductible as a business
expense.  The trial court instructed the jury that it could convict whether the
deductions were improper, as the government argued, or whether they were
mischaracterized, as suggested by the government's expert.  On appeal, the
defendant challenged the conviction, claiming that mischaracterization of
deductions was insufficient to support a section 7206(2) conviction.  The court,
however, affirmed the conviction and held that whether the deductions were
improperly taken or whether they were mischaracterized was inconsequential.  In
either case, the court reasoned, the  tax return entries were false, as
proscribed by the statute.  Helmsley, 941 F.2d at 93.    

      In United States v. Damon, 676 F.2d 1060, 1063-64 (5th Cir.
1982), the defendant tax return preparers argued on appeal that their convictions
under section 7206(2) were improper because the documents containing the false
information, defendants' Schedules C, "were not specifically and explicitly
required by statute or regulation . . . ."   Damon, 676 F.2d at
1063.   The Fifth Circuit affirmed the convictions on the grounds that the
schedules prepared by defendants were "integral parts of such returns and were
incorporated therein by reference." Damon, 676 F.2d at 1064.  

      In United States v. Taylor, 574 F.2d 232 (5th Cir. 1978), the
court held that the omission of a substantial amount of livestock receipts on tax
return schedules constituted the omission of a material matter as a matter of law
because the schedules were integral parts of the tax return.  At trial, Taylor
was permitted to introduce evidence that he did not believe that the omission of
livestock receipts was material because offsetting expenses rendered the omission
without tax consequences.  The Fifth Circuit noted that the existence of
offsetting expenses did not go to the materiality of the omitted receipts, "but
to the lack of mens rea in their omission."  Taylor,
574 F.2d at 237.  Accordingly, the defendant's belief of a lack of tax
consequences may be admissible on the willfulness of the omission, even if not
relevant to the materiality of the omission.

      Although Taylor was a section 7206(1) case, the same
principles apply to section 7206(2) violations.  See Damon,
676 F.2d at 1063-64.

                        
                        13.06 WILLFULNESS

      Willfulness has the same meaning in section 7206(2) cases as it does in
other criminal tax violations.  "The Court, in fact, has recognized that the word
'willfully' in these statutes generally connotes a voluntary, intentional
violation of a known legal duty."  United States v. Bishop,
412 U.S. 346, 360 (1973); see also Cheek v. United States,
498 U.S. 192, 200 (1991); United States v. Ervasti, 201 F.3d 1029,
1041 (8th Cir. 2000).  For additional discussions of willfulness, see
Sections 8.06 and 12.09, supra.

      In Edwards v. United States, 375 F.2d 862 (9th Cir. 1967),
the defendant tax attorney collected estimated tax payments from his clients,
pocketed the money, and reported on the clients' returns that the estimated tax
payments had been made and were properly credited against the tax due.  The
defendant argued that he did not intend to evade tax but only wanted to gain a
little time.  The court summarized the applicable law:

      The offense to which this section is directed is not evasion or defeat of
      tax.  Rather it is falsification and the counseling and procuring of such
      deception as to any material matter.  Here the falsification was committed
      deliberately, with full understanding of its materiality; with intent that
      it be accepted as true and that appellant thereby gain the end he sought. 
      This in our judgment is sufficient to constitute willfulness under this
      section.

Edwards, 375 F.2d at 865;  see also United States v.
Greer, 607 F.2d 1251, 1252 (9th Cir.1979) ("section 7206(2) requires that
the accused must know or believe that his actions will likely lead to the filing
of a false return").

      It is not enough that the defendant's purposeful conduct merely resulted
in the filing of a false return; the false filing must also have been a
deliberate objective of the defendant.  See United States v.
Salerno, 902 F.2d 1429, 1433 (9th Cir. 1990) (convictions reversed
because government failed to show that casino employee knew or understood that
his embezzlement scheme would affect preparation of the casino corporate
returns); United States v. Aracri, 968 F.2d 1512, 1523 (2d Cir.
1992) (government presented sufficient evidence for jury to find that defendants
intended that fuel companies file false gasoline excise tax returns); cf.
United States v. Gurary, 860 F.2d 521 (2d Cir. 1988) (government
presented sufficient evidence to show that defendants, who sold fraudulent
purchase invoices to corporations, knew their scheme would result in corporations
using the fraudulent invoices in the preparation of the tax returns). 

      Section 7206(2) charges often arise in prosecutions of promoters of abusive
tax shelters.  In this context, a few cases have recognized uncertainty in the
law as a defense to a finding of willfulness. See United States v.
Dahlstrom, 713 F.2d 1423, 1428 (9th Cir. 1983) (court reversed the
section 7206(2) convictions of the defendants, who had instructed investors on
creating and carrying out a tax avoidance scheme, because the legality of the
shelters was "completely unsettled").  The Ninth Circuit, however, has narrowed
the circumstances in which such a defense may be raised to situations in which
the defendant has merely advocated tax strategies that were of debatable
legality.  See United States v. Schulman, 817 F.2d 1355,
1359 (9th Cir.1987).  Accordingly, Dahlstrom has been held not to
provide a defense for defendants whose participation in an illegal scheme
extended beyond advocacy and included actual assistance in effectuating the tax
avoidance strategies.  United States v. Tranakos, 911 F.2d 1422,
1430-31 (10th Cir. 1990);  United States v. Kelley, 864 F.2d 569,
577 (7th Cir. 1989); United States v. Krall, 835 F.2d 711, 713-14
(8th Cir. 1987); United States v. Solomon, 825 F.2d 1292, 1297
(9th Cir. 1987).

      In instances where the defendant's promotion of the tax avoidance scheme
extended beyond mere advocacy, the government may show that, although the law is
asserted (by the defendant) to be unclear as to the scheme's legality, the
defendant's conduct was clearly prohibited.  See Solomon,
825 F.2d at 1297 (even assuming that the patent tax shelter itself was legal or
of unsettled legality, defendants could not rely on an uncertainty of the law
defense since their conduct in administration of the scheme was so clearly
fraudulent).  See also Schulman, 817 F.2d at 1359.

      While mere advocacy may not be sufficient for a finding of aiding in the
filing of false documents, it is not necessary that the defendant have a definite
relationship (i.e. business partners, etc.) with the filing party. 
See Aracri, 968 F.2d at 1524 (defendants' aiding in the
filing of false documents rendered them criminally liable regardless of
relationship to filing organization).

                      
                      13.07  CASE EXAMPLES

13.07[1]  Return Preparers

      In United States v. Jackson, 452 F.2d 144 (7th Cir. 1971),
the Seventh Circuit affirmed the conviction of a return preparer.  Twelve
taxpayer witnesses testified that they paid the defendant to prepare their
returns, which contained itemized deductions and exemptions in excess of any
amount they could correctly claim.  The returns contained false deductions for
such things as medical payments, charitable contributions, special work clothes,
interest expenses, and the like.  All of the deductions were fictitious and
supplied by the defendant, who told the taxpayers they would receive refunds. 
The defendant argued that his conviction was unfair because the client-taxpayers
had an incentive to lie.  The court concluded that "the innocence or guilty
knowledge of a  taxpayer is irrelevant to such a prosecution." 
Jackson, 452 F.2d at 147; see also United States v.
Haynes, 573 F.2d 236 (5th Cir.1978).


13.07[2]  Sham Circular Financing Transactions

      In United States v. Clardy, 612 F.2d 1139 (9th Cir. 1980),
check kiting and check swapping were used by defendants as a basis for deducting
non-existent interest payments.  The jury was instructed on a good faith belief
defense, but was also instructed:  "If you find from the evidence that
transactions do not exist except in form and are otherwise unreal or sham, you
are to consider whether the defendant willfully engaged in such conduct for the
purpose of procuring, counseling, advising, or preparing or presenting false
federal income tax returns as charged in the indictment."  Clardy,
612 F.2d at 1152.


13.07[3]  Inflated Values

      In United States v. Barshov, 733 F.2d 842 (11th Cir. 1984),
the defendants' general partners had formed limited partnerships to purchase
motion pictures for distribution and exhibition.  The defendants inflated the
purchase prices and the income generated by the films to maximize the
depreciation costs and the investment credits, and caused returns to be filed
based on the inflated numbers.  The Eleventh Circuit affirmed the conviction for
aiding and assisting in the preparation of false partnership returns and
individual returns.


13.07[4]  Political Contributions Deducted as Business Expenses

      In United States v. McCrane, 527 F.2d 906 (3d Cir. 1975),
vacated and remanded on another issue, 427 U.S. 909, reaff'd on section
7206(2) counts, vacated and remanded on other counts, 547 F.2d 204 (3d Cir.
1976), the defendant, who was the finance chairman for a gubernatorial candidate,
solicited political contributions, but issued fictitious invoices through a
public relations firm describing the money as payment for advertising services
in order to disguise the payments as business expenses for the contributors.  The
contributors then deducted the contributions as business expenses on their
returns.  The defendant argued that section 7206(2) applies only to accountants,
bookkeepers, tax consultants, or preparers who actually prepare the tax returns. 
Defendant's conviction was affirmed.  The Court noted that "[t]he defendant was
convicted on evidence that he assisted certain taxpayers by providing false
invoices as documentation of business expenses . . . [and] [h]e also advised and
counseled the contributors to use these expenditures as tax deductions." 
McCrane, 527 F.2d at 913.


13.07[5]  Winning Racetrack Tickets -- Not Cashed by True Owner

      Winners at the racetrack often pay other people to cash winning tickets so
that the real winners' names will not appear on the Form 1099, which the
racetrack files with the Internal Revenue Service.

      In United States v. Haimowitz, 404 F.2d 38 (2d Cir. 1968),
two people testified that they had cashed about $100,000 worth of winning tickets
for the defendants for a commission of 2 1/2% or 3%.  A third witness testified
that he had cashed $200,000 worth of winning tickets.  The defendant apparently
told two of the cashing parties that they would be given sufficient losing
tickets to offset the winnings attributed to them.  The Second Circuit upheld the
conviction because the "scheme of causing the track to record another person as
the winner was calculated to defeat the government in its tax collection." 
Haimowitz, 404 F.2d at 40.  See also United
States v. Monteiro, 871 F.2d 204 (1st Cir.1989).  Similarly, in
United States v. McGee, 572 F. 2d 1097, 1099 (1978), the Fifth
Circuit affirmed the conviction, under section 7206(2), of a defendant who cashed
winning racetrack tickets for others under his own name in return for a 10%
commission.  The court stated that "[t]he statute is written disjunctively and
it is sufficient for the government to prove either that the information was
supplied with the intent to deceive or that the information was false in the
sense of being deceptive."  McGee, 572 F. 2d at 1099 (citing
United States v. Snider, 502 F.2d 645 (4th Cir. 1974)).


13.07[6]  Payoffs to Union Officials Reflected as Comm
Repairs

      In United States v. Kopituk, 690 F.2d, 1289 (11th Cir. 1982),
the defendants made payoffs to union officials, but falsely reflected the amounts
in corporate records as payments for commissions, repairs, and other items. 
Pointing out that even if it were true that the defendants never examined the
returns, which had been prepared by their accountant, the Eleventh Circuit held
that "[s]ince the tax returns were prepared in reliance upon the information
supplied by appellants, they were chargeable with knowledge of the content of
those returns regardless of the fact that they did not actually fill out the tax
forms."  Kopituk, 690 F.2d at 1333 (citations omitted).

                              
                              13.08  VENUE
                              
      Venue will lie where the acts of aiding and assisting took place or where
the return was filed.  United States v. Hirschfeld, 964 F.2d 318,
321 (4th Cir. 1992).  But see United States v. Griffin,
814 F.2d 806, 810 n.7 (1st Cir. 1987) (choosing to leave open the question of
whether the district of filing provides a sufficient basis for venue in a section
7206(2) prosecution). 

      For further information, see the discussion of venue in Section
6.00, supra, and the discussion of venue in connection with section
7206(1) violations in Section 12.11, supra.

                      
                      13.09  STATUTE OF LIMITATIONS
                      
      The statute of limitations for section 7206(2) offenses is six years from
the date of filing, unless the return is filed early, in which case the statute
of limitations runs from the statutory due date for filing.  26 U.S.C.
§ 6531(3) (1986); United States v. Habig, 390 U.S. 222, 223
(1968).

      Where the defendant's act of aiding a false filing precedes the filing of
a return, the significant event is the filing of the false document, not the
defendant's act that aided or caused the filing.  Thus, although the defendant
may have provided false information to the filer more than six years prior to the
filing of the return, the filing of a subsequent return based on the false
information renews the limitations period every time such filing occurs. 
See, e.g., United States v. Kelley, 864 F.2d 569,
574-75, (7th Cir.1989) (although defendant sold an abusive tax shelter more than
six years before indictment, his clients' annual claims for illegal deductions
arising from the shelter within the six years prior to his prosecution made the
charges timely). 

      For further information, see the discussion of the statute of
limitations in Section 7.00, supra.