United States v. Hoskins
2011 U.S. App. LEXIS 16636
| 10th Cir. | 2011Background
- Hoskins managed Companions, a Salt Lake City escort service, and oversaw finances and credit-card receipts.
- 2002 tax return reported $902,750 in gross receipts; government later determined actual receipts exceeded $2.1 million based on credit-card data and cash, implying over $1.2 million in unreported income.
- Hoskins and Roy Hoskins filed a joint 2002 Form 1040; Hoskins signed the return with knowledge of Companions’ finances.
- Hoskins was convicted under 26 U.S.C. § 7201 for willfully attempting to evade Roy Hoskins’s taxes; at sentencing the Government’s tax-loss estimate exceeded $485,000.
- District court rejected Hoskins’s alternative tax-loss calculation (about $160,202) based on unclaimed deductions and accepted the Government’s higher tax loss for Guidelines purposes.
- Hoskins challenged the tax-loss calculation, the sufficiency of the evidence, and the application of a § 2T1.1(b)(1) enhancement for unreported income from criminal activity.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was there sufficient willfulness for tax evasion? | Hoskins knowingly evaded taxes through underreporting. | Hoskins lacked knowledge of the tax-law consequences and acted in good faith signing the return. | Yes; willfulness proven by Hoskins's managerial role and knowledge. |
| Did signing the false 2002 return constitute an affirmative act of evasion? | Signing and filing a false return constitutes affirmative evasion. | Signatory act alone is not enough without awareness of falsity. | Yes; signing the false return suffices as an affirmative act. |
| Whether the tax loss was properly calculated, including unclaimed deductions. | Tax loss based on unreported income; unclaimed deductions should not reduce loss. | Unclaimed deductions should be considered to reach a more accurate loss. | The district court’s tax-loss calculation was reasonable; unclaimed deductions may be considered in appropriate circumstances. |
| Should escort tips and commissions be included in gross receipts for tax-loss purposes? | Escorts’ commissions and tips part of gross receipts; double-counting avoided by court. | Tips are not income of the company and should be excluded from gross receipts. | Escorts’ commissions included; tips largely treated as employee remuneration and not gross income of Companions, but record insufficient to separate; no plain error found. |
| Did the district court properly apply the § 2T1.1(b)(1) enhancement for unreported income from criminal activity? | More than $10,000 of unreported income arose from prostitution. | Challenge to the factual basis for the enhancement. | Not clearly erroneous; enhancement affirmed. |
Key Cases Cited
- Cheek v. United States, 498 U.S. 192 (1991) (willfulness requires knowledge of legal duty)
- United States v. Thompson, 518 F.3d 832 (10th Cir. 2008) (elements of tax evasion: liability, willfulness, affirmative act)
- United States v. Spencer, 178 F.3d 1365 (10th Cir. 1999) (limits on unclaimed deductions in tax-loss computation)
- United States v. Chavin, 316 F.3d 666 (7th Cir. 2002) (definition of tax loss and unclaimed deductions)
- United States v. Delfino, 510 F.3d 468 (4th Cir. 2007) (tax loss assumption in guidelines and deductions)
- United States v. Yip, 592 F.3d 1035 (9th Cir. 2010) (limits on considering unclaimed deductions for tax loss)
- United States v. Clarke, 562 F.3d 1158 (11th Cir. 2009) (tax loss calculations and deductions)
- United States v. Gordon, 291 F.3d 181 (2d Cir. 2002) (windfall prohibition in tax loss)