14.01 STATUTORY LANGUAGE:  26 U.S.C. § 7206(4)

14.02 GENERALLY

14.03 ELEMENTS OF OFFENSE

14.04 REMOVES, DEPOSITS, OR CONCEALS

14.05 TAX IMPOSED OR LEVY AUTHORIZED

14.06 WILLFULNESS

14.07 VENUE

14.08 STATUTE OF LIMITATIONS

      14.01  STATUTORY LANGUAGE:  26 U.S.C. § 7206(4)

      §7206.  Fraud and false statements

      Any person who --

            (4) Removal or concealment with intent to defraud. -- Removes,

      deposits, or conceals, or is concerned in removing, depositing, or

      concealing, any goods or commodities for or in respect whereof any tax is

      or shall be imposed, or any property upon which levy is authorized by

      section 6331, with intent to evade or defeat the assessment or collection

      of any tax imposed by this title * * *  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 three years, or

      both, together with the costs of prosecution.

            * As to offenses committed after 
December 31, 1984
, the Criminal

      Fine Enforcement Act of 1984 (P.L. 98-596) enacted 18 U.S.C.

      § 3623 [FN1] which increased the maximum permissible fines for both

      misdemeanors and felonies.  For the felony offenses set forth in section

      7206(4), the maximum permissible fine for offenses committed after

      
December 31, 1984
, is increased to 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. 

                        14.02  GENERALLY

      Section 7206(4) prosecutions are rarely brought because in the usual

criminal income tax case the violation is covered by section 7201 (evasion) or

section 7206(1) (subscribing to a false return) of the Internal Revenue Code

(Title 26).  However, it is available as a prosecutorial tool, and there are some

factual situations that lend themselves to a section 7206(4) prosecution.

      Section 7206(4) and its predecessor [FN2] have been used from an early date

in cases involving the sale of untaxed liquor.  See, e.g., United

States v. Champion, 387 F.2d 561 (4th Cir. 1967); 

United States

 v.

Davis
, 369 F.2d 775 (4th Cir. 1966); 

United States

 v. Goss,

353 F.2d 671 (4th Cir. 1965); Hyche v. 

United States

, 286 F.2d 248

(5th Cir. 1961); Ingram v. 

United States

, 241 F.2d 708 (5th Cir.

1957); Price v. 

United States

, 150 F.2d 283 (5th Cir. 1945).  Cases

involving the sale of untaxed liquor are beyond the scope of this manual, but

some of those cases are helpful in interpreting the statute.

      Congress expanded the scope of the offense by amending section 7206(4) of

the 1954 Internal Revenue Code to include not only concealment of goods or

commodities, but also, conduct committed in order to avoid levies.  United

States v. Swarthout, 420 F.2d 831, 835 (6th Cir. 1970) (citing H.R. Rep.

No. 1337 in 3 U.S.C. Cong. & Ad. News, p. 4573 (1954)).

                   14.03  ELEMENTS OF OFFENSE

      To establish a section 7206(4) offense, the following elements must be

proved beyond a reasonable doubt:

      1.    The defendant removes, deposits, or conceals or is concerned in

            removing, depositing, or concealing;

      2.    Goods or commodities where a tax is or shall be imposed, or any

            property upon which levy is authorized by section 6331 (Title 26);

      3.    Intent to evade or defeat the assessment or collection of any tax

            imposed by Title 26.

              14.04  REMOVES, DEPOSITS, OR CONCEALS

      Section 7206(4) applies to any person who removes, deposits, or conceals

certain goods, commodities or property upon which a tax is or shall be imposed,

or upon which a levy is authorized.  By its own terms, the statute is not limited

to persons who directly conceal goods, commodities, or property, but extends to

any person "concerned in" those acts.  26 U.S.C. § 7206(4).  The concept of

"conceals" is not limited to a physical concealment of the property. 

United States

 v. Bregman, 306 F.2d 653 (3d Cir. 1962).

      In Bregman, the one-count indictment charged the defendants

as follows:  

      That on or about 

October 30, 19
54
, at 

Philadelphia

, in the Eastern

      District of Pennsylvania, Rudolph R. Bregman and Milton H.L. Schwartz,

      with intent to evade and defeat the collection of taxes assessed against

      Rudolph Motor Service, Inc., did knowingly and unlawfully remove and

      conceal eighteen (18) Strick Trailers, property of Rudolph Motor Service,

      Inc., upon which a levy was authorized by Section 6331 of the Internal

      Revenue Code of 1954 . . . .

Bregman, 306 F.2d at 654.  Defendant Bregman argued that there was

a variance between the indictment and the proof because the indictment charged

the concealment of 18 trailers and "the government's proof only established a

false entry with respect to possession of the trailers."  Bregman,

306 F.2d at 655.  The court rejected the defendant's argument:

      When Bregman falsified Rudolph's corporate records to show that the

      trailers had been "repossessed" the effect of that falsification was to

      "conceal" Rudolph's possession of the trailers.

Bregman, 306 F.2d at 655.  According to the court, the applicable

principle is that the word "conceal" does not merely mean to secrete or hide

away.  It also means "to prevent the discovery of or to withhold knowledge of." 

Bregman, 306 F.2d at 656. Therefore, the court concluded that:

      The government's proof that Bregman falsified the records pertaining to

      the trailers -- property of Rudolph -- to show that they had been

      "repossessed" was foursquare with the charge of "concealment" in the

      indictment and not by any stretch of the imagination at variance with it.

Bregman, 306 F.2d at 656.

      Proof of any one of the prohibited acts -- "removing, depositing or

concealing" -- is sufficient for conviction, even if they are charged

conjunctively.  
United States
 v. 

Davis

, 369 F.2d 775, 779 (4th Cir.

1966); Hyche v. 

United States

, 286 F.2d 248, 249 (5th Cir. 1961);

Price v. 

United States

, 150 F.2d 283, 285 (5th Cir. 1945).

         14.05  TAX IMPOSED OR LEVY AUTHORIZED          

      Care should be exercised in drafting indictments charging violations of

section 7206(4).  Where the defendant is charged with removing, depositing, or

concealing goods or commodities for or in respect whereof any tax is or shall be

imposed, the prohibited acts may be based on actions committed prior to the time

the tax is due.  However, if the charge is based upon the commission of the

prohibited actions with "regard to property upon which levy is authorized," at

least one court has held that such actions must have occurred after a tax has

been assessed and the taxpayer has refused to pay after notice and demand for

payment.  

United States

 v. Swarthout, 420 F.2d 831, 833 (6th Cir.

1970).

      Concealment of assets prior to assessment or levy may be charged

under section 7201.  By including concealment of assets among the prohibited

conduct in section 7206(4), Congress did not intend to provide the exclusive

criminal remedy for such conduct.  

United States

 v. Hook, 781 F.2d

1166, 1170 (6th Cir. 1986).  The government is not foreclosed from charging those

who conceal assets, either before or after assessment or levy, under the general

evasion statute.  Hook, 781 F.2d at 1170; but see

United States

 v. Minarik, 875 F.2d 1186, 1195 (6th Cir.

1989) (reversing conviction based on finding that government should have charged

defendant with violating offense prong of conspiracy statute with reference to

section 7206(4), rather than with violating general defraud prong). [FN3]

                       14.06  WILLFULNESS

      The word "willfully" is not used in section 7206(4).  Rather, the statute

uses the phrase "with the intent to evade or defeat."  26 U.S.C. § 7206(4). 

Thus, it is not enough to show a voluntary, intentional violation of a known

legal duty.  Instead, it must be shown that the defendant's purpose was to evade

or defeat the assessment or collection of a tax.  Nevertheless, the same type of

evidence used to establish willfulness in an attempted evasion prosecution often

may be used to prove an intent to evade or defeat tax in a prosecution under

section 7206(4).  Reference should accordingly be made to the discussion of

willfulness in Sections 8.06 and 12.09, supra.

                          14.07  VENUE

      The Sixth Amendment to the Constitution provides that trials shall be in

the "State and district wherein the crime shall have been committed * * * ." 

See Fed. R. Crim. P. 18.  If a statute does not indicate where Congress

considers the place of committing a crime to be, "the locus delicti must be

determined from the nature of the crime alleged and the location of the act or

acts constituting it."  
United States
 v. 
Anderson
, 328 

U.S.

 699,

703 (1946).  In section 7206(4) prosecutions, venue is proper in the judicial

district in which the act of concealment took place.  Venue also may be laid

where the return was filed if the charge is an attempt to evade and defeat the

assessment of a tax.  See discussion of venue in Section 6.00,

supra.

                  14.08  STATUTE OF LIMITATIONS

      The statute of limitations for section 7206(4) offenses is three years. 

26 U.S.C. § 6531.  For a discussion as to the measurement of the statute of

limitations, see Section 7.00, supra. 

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

FN 2. Internal Revenue Code of 1939, Sec. 3321(a) (26 U.S.C. 1952 ed.).

FN 3. Minarik has not fared well over time.  The Sixth Circuit has

limited it, see 

United States

 v. Khalife, 106 F.3d 1300,

1306 (6th Cir. 1996); 

United States

 v. Kraig, 99 F.3d 1361, 366-68

(6th Cir. 1996);  

United States

 v. Sturman, 951 F.2d 1466, 1473

(6th Cir. 1991); 

United States

 v. Mohney, 949 F.2d 899, 902-03

(6th Cir. 1991), and other circuits have shown no inclination to follow it,

United States

 v. Goulding, 26 F.3d 656, 663 (7th Cir. 1994);

United States
 v. Arch Trading 
Co.
, 987 F.2d 1087, 1092 (4th Cir.

1993); 

United States

 v. Harmas, 974 F.2d 1262, 1267 (11th Cir.

1992).