## Facts

- Fred Black failed to file federal income tax returns for 1978, 1979, and 1981.
- Black received at least $65,000 of taxable income in each of those years, totaling more than $300,000.
- Beginning in 1975, Black was subject to an Internal Revenue Service (IRS) lien of approximately $3 million.
- During the relevant period, Black created and controlled two corporations.
- Black kept no personal bank accounts and routinely paid personal expenses with checks drawn on the corporations’ bank accounts.
- Black admitted that he used the corporate accounts to conceal his spending from the IRS.
- Black contended that the corporate payments were loans he intended to repay, but the record contained no indication that he repaid, or intended to repay, the amounts taken for personal use.
- At trial, the government proved unreported income by identifying particular personal expenditures paid from corporate accounts (a “specific items” method).
- A jury convicted Black of income tax evasion, and he appealed to the United States Court of Appeals for the District of Columbia Circuit.

## Issues

1. Whether the government could prove unreported income in a tax-evasion prosecution by using a “specific items” method based on corporate payments of the defendant’s personal expenses.
2. Whether the evidence was sufficient for the jury to treat the corporate disbursements as taxable income to Black rather than bona fide loans.
3. Whether the evidence was sufficient to support a finding that Black willfully attempted to evade or defeat federal income tax.

## Decision

- The D.C. Circuit affirmed Black’s tax-evasion conviction.
- The court held that the government permissibly relied on identified corporate payments of Black’s personal expenses as specific items of unreported income.
- The court concluded that the jury could reasonably reject Black’s loan theory given the lack of objective evidence of indebtedness and the absence of repayment.
- The court held that the evidence, including Black’s failure to file returns despite substantial income and his admitted effort to conceal spending from the IRS, supported a finding of willfulness.

## Legal Principles

- The government may prove unreported income in a criminal tax case through a “specific items” method by presenting evidence of particular, identifiable transactions that constitute taxable income.
- Corporate payments that satisfy an individual’s personal expenses may be treated as taxable income to that individual when the payments confer a personal economic benefit and are not shown to be bona fide loans.
- A claimed “loan” characterization may be rejected when the surrounding facts show no meaningful indicia of a debtor-creditor relationship, including no demonstrated repayment or intent to repay.
- On appellate review of sufficiency of the evidence, the conviction is upheld if a reasonable jury could find the elements of the offense beyond a reasonable doubt based on the evidence presented.

## Conclusion

The D.C. Circuit affirmed Fred Black’s tax-evasion conviction because the government properly proved unreported income by identifying specific personal expenses paid through corporations Black controlled, the jury could treat those payments as income rather than loans in light of the absence of repayment or evidence of genuine indebtedness, and Black’s nonfiling and admitted concealment of spending supported a finding of willful evasion.


United States v. Black, 843 F.2d 1456 (1988)