Dated: January 16, 1998
   The indictment was filed in the district court on November 21, 1996, and it charged Appellant Elton Silkman ("Silkman") with violations of 26 U.S.C., §7201; jurisdiction of the district court was established pursuant to 18 U.S.C., §3231. The U.S. District Judge to whom trial of this case was assigned was Hon. Richard H. Battey, and no decision he rendered in this case was published. After Silkman's conviction, sentencing occurred on October 20,  1997, and the notice of appeal was timely filed on October 30, 1997. This court's jurisdiction of this appeal is obtained via 28 U.S.C., §1291.
  The issues raised in this appeal all arose during the course of trial. The first two issues relate to the elements of an income tax evasion case and the burden of proof the Government carries in these types of cases as well as the defenses which may be asserted; the latter two relate to the exclusion of defense evidence. The issues for this appeal are:

ISSUE 1: Did the district court err in failing to admit into evidence Silkman's business expenses and deductions for the years 1981 through 1985 to support his position that he owed no federal income taxes?

It appears that the decision in Clark v. United States, 211 F.2d 100, 103 (8th Cir. 1954), controls this issue.

ISSUE 2: Did the district court err in denying Silkman's motion for judgment of acquittal?

It appears that the decision in United States v. Abodeely, 801 F.2d 1020, 1023 (8th Cir. 1986), controls this issue.

ISSUE 3: Did the district court err in excluding Silkman's proposed Ex. 106 from admission into evidence?

Two decisions from other courts, Portillo v. Commissioner, 932 F.2d 1128 (5th Cir. 1991), and Senter v. Commissioner, T.C. Memo 1995-311, constitute persuasive authority for resolution of this issue.

ISSUE 4: Did the district court err in denying admission of Silkman's proposed Ex. 107 into evidence?

The persuasive authority of  Brafman v. United States, 384 F.2d 863 (5th Cir. 1967), is applicable to deciding this issue.

 A. Proceedings in the district court.

 On November 21, 1996, the instant indictment was returned by a federal grand jury sitting in the District of South Dakota at Rapid City (C.R.Doc. #1).  Each of the five (5) counts of the indictment charged that during the period of March 21, 1991, through November 25, 1992, Silkman had violated 26 U.S.C., §7201 (income tax evasion) by concealing his assets from the Internal Revenue Service and engaging in other evasive acts in order to prevent collection of income taxes allegedly assessed against him for the years 1981 through 1985. Silkman was arraigned on January 2, 1997, and he entered pleas of not guilty to each count of the indictment.

 While several pre-trial motions were filed by Silkman, only one is relevant for purposes of this appeal. The theory of prosecution here, shown via the language of the indictment as well as through discovery, was that the Internal Revenue Service had issued on March 6, 1991,  a statutory "notice of deficiency" to Silkman seeking to assess federal income taxes against him for the years 1981 through 1985 and that those taxes were ultimately assessed on September 16, 1991 (Addendum at 57). The indictment alleged that during the pendency of this process of assessing taxes for these years, Silkman had used various schemes to liquidate his property for the purpose of preventing the Internal Revenue Service from collecting the taxes due. Since the actual assessment made by the IRS on September 16, 1991, was of critical importance to this case, Silkman sought via certain discovery requests (C.R.Doc. #20) those actual assessment documents. But the Government never responded to this request.

 Trial of this case commenced on July 14, 1997, and ended on July 17 when the jury returned guilty verdicts against Silkman upon all five counts of the indictment (C.R.Doc. #41). Sentencing occurred on October 20, 1997, and Silkman was sentenced to incarceration for a period of 27 months and fined $50,000 (C.R. Doc. #52; Addendum at 50). Silkman's motion for bond on appeal (C.R.Doc. #48), was denied and presently Silkman is incarcerated. Notice of appeal was timely filed on October 30, 1997 (C.R.Doc. #53).

 B. Statement of the facts.

 Elton Silkman was born on a farm in Kansas in 1932 and he has been a farmer all of his life (R.T. 510-511). After farming with his father for about 10 years between 1955 and 1965, he relocated and farmed for almost 8 years in eastern Colorado (R.T. 512-513).  He later sold that farm and acquired in October, 1973, a 5700 acre one in Harding County, South Dakota for a price of $710,000 (R.T. 116-117, 275-276, 513).

 Silkman has had tax problems of various sorts in the past. During the late sixties, he was advised by his tax accountant to take advantage of certain investment tax credits by selling  grain and cattle before the end of the year. Silkman followed this advice only to be confronted with a retro-active tax act passed by Congress which modified these investment tax credits. This change in tax law devastated Silkman and it took several years for him to financially recover (R.T. 519-523). Still later and as a result of having sold his farm in Colorado and bought another one in South Dakota, the IRS raised questions regarding this sale's tax consequences and sought to audit Silkman's tax returns for 1973 and 1974 (R.T. 523-524). In response, Silkman attended some meetings where he learned about the Fourth Amendment to the U.S. Constitution and consequently he sought to apply this newly discovered knowledge of the law to an IRS summons seeking production of his books and records (R.T. 525-526). Silkman was eventually served with a summons and complaint from federal court seeking to enforce that IRS summons and he litigated for several years the constitutional questions he thought were present in such a case (R.T. 528-529), even to the point of appealing to this court (R.T. 530-531). However, he was ultimately required to turn over his financial records to the IRS but after audit, there were no additional taxes due for these years (R.T. 532-533).

 The late seventies and early eighties were not profitable years for Silkman. While he had paid very little income taxes during the late seventies (R.T. 534), President Carter's grain embargo, the high interest rates on loans of that period and other factors pushed his farm operation into "the red" (R.T. 535-536). During 1981, Silkman continued to raise livestock, grains and silage, he incurred expenses, and in doing so he had a tremendous loss for that year (R.T. 538-540). His financial condition did not change in the following years of 1982 (R.T. 541-542), 1983 (R.T. 542-543), 1984 (R.T. 543-544), and 1985 (R.T. 544). Because of his losses during each of these years, he believed that he owed no income taxes and thus did not file federal income tax returns (Id.; R.T. 34-38) (Addendum at 60).

 These very lean years forced Silkman to file for chapter 11 bankruptcy protection in December, 1986 (R.T. 545). As a result, interest payments on his loans were eliminated and unsecured debts were discharged (R.T. 546, 550). While the value of his farm land at that time had dropped to about $500,000 (R.T. 547, 556), he was still able to get a reorganization plan approved in October, 1987 (R.T. 548) and he operated as a debtor in possession in bankruptcy from that time until his discharge in March, 1990 (R.T. 549, 597).

 Silkman's wife died in October, 1988, and her death caused him to loose interest in farming (R.T. 549). Deciding upon a new career and leaving his farm to the care of his sons, Silkman enrolled in the fall of 1989 in a massage therapy school in Seattle where one of his instructors was a woman named Linda Avery, with whom Silkman became friends (R.T. 516-517, 551-553). After a year at this school, Silkman returned to his farm in June of 1990 (R.T. 517, 553), and only then realized how much his farm needed to be improved. Determining that it would take about $80,000 to $90,000 for him to refurbish his farm, Silkman decided to completely get out of farming and concluded that he had to follow the footsteps of his father and establish an estate plan through use of a trust (R.T. 555, 559).

 Silkman learned about a trust company named Universal Trust Services in late 1990  and contacted some of its agents, eventually meeting a man named Robert Strong in either late January or February, 1991 (R.T. 113-115, 557). This company or a related one, Systems Two Limited, created for Silkman a trust named Exodus Trust, which had as its beneficiary another one named Avalon Trust (R.T. 558, 627-629), and the documents establishing the Exodus Trust were executed on February 5, 1991 (R.T. 560). The trustees for the Exodus Trust were friends of Silkman, Lloyd Dale and Linda Avery (R.T. 560, 633-635). Besides avoiding probate, another purpose of creating this trust was to have the Exodus Trust take title to the farm and manage it (R.T. 559, 561), and there was also the possibility of liquidation of the farm  (R.T. 570). The trust instrument for the Exodus Trust permitted the appointment of a manager (R.T. 473-481) and trustee Dale decided on April 10, 1991, that Silkman should be the manager for this trust and so appointed him as a trust agent (R.T. 569-570, 637-638).

 While all of these events were happening, the IRS was commencing an administrative process to assert that Silkman owed federal income taxes for the years 1981 through 1985. In October, 1990, based upon U.S. Department of Agriculture statistics, the IRS concluded that Silkman had made $71,182 in 1981, $39,857 in 1982, $40,851 in 1983, $55,045 in 1984 and $395,618 in 1985 (R.T. 89-90) (Addendum at 65). This information was never sent to Silkman (R.T. 559). But on March 6, 1991, the IRS sent to Silkman a "notice of deficiency" for the tax years 1981 through 1985 (G.Ex. 6), which alleged that Silkman earned the following amounts and owed the following taxes:

See R.T. 34-40, G.Ex. 6 (Addendum at 57). This notice of deficiency, the "ticket to tax court," was not challenged in U.S. Tax Court by Silkman, so taxes in these amounts were allegedly assessed against Silkman on September 16, 1991 (G. Exs. 1-5, R.T. 94).

 It must be noted that Silkman did respond to this notice of deficiency. On April 29 and May 9, 1991, Silkman sent letters to the IRS expressing his objections to the notice (G.Exs. 6, 7, 9; R.T. 40, 43, 47, 49). Rather than petition Tax Court, Silkman believed that he could request an abatement of the notice and such request would result in a hearing of some type where he could explain his position that he did not owe any taxes for these years because of his losses (R.T. 564-566, 609). When the IRS did not respond either by letter or conducting a meeting, Silkman concluded that the matter had been resolved (R.T. 657-568).

 After Exodus Trust had been established, Silkman and trustee Dale started the process of conveying assets to it and one of the first matters that required attention concerned the federal farm subsidies programs. Since 1979, Silkman had been participating in certain federal farm programs and receiving payments therefrom (R.T. 356-357). He renewed his participation in these programs for ten (10) years in 1987 (R.T. 361, 375). In the spring of 1991, the U.S.D.A. Farm Service Agency sent several checks to Silkman (R.T. 364), but he returned those checks and showed the farm program managers that Exodus Trust was operating the farm (R.T. 363, 373, 385-386, 389-392); consequently, new checks were sent to Exodus Trust in late July, 1991, for $11,776 and $49,987; another one for $14,332 was sent in early 1992 (R.T. 365-369).

 After the creation of the Exodus Trust, trustee Dale, having a dim view of the prospects for agriculture, concluded that it was best to sell the farm and on April 10, 1991, approved the farm's sale (R.T. 570, 639). Silkman conveyed his farm to this trust by deed recorded on May 9, 1991 (G.Ex. 26, R.T. 278), and pursuant to the trustee's instructions, listed the farm for sale with a real estate broker named Bryce Nelson (R.T. 117), via a listing agreement dated April 15, 1991 (G.Ex. 28, R.T. 118-119, 571-572). Nelson eventually secured several buyers for this farm and each bought certain parts of it via a purchase agreement dated July 24, 1991 (R.T. 139). Because this property was titled in the name of a trust, Nelson secured a copy of the trust instrument, provided it to the loan closing attorney who was also writing the title insurance, and the title insurance company approved the title (R.T. 142, 145, 439-442). On October 13, 1991, escrow funds in the amount of $23,913.07 were paid to Exodus Trust (G.Ex. 31, R.T. 124, 147). The sale of the farm was closed on October 15, 1991 (R.T. 141), and the remaining net proceeds of this sale resulted in the payment of $640,634.60 to Exodus Trust (G.Ex. 33, R.T. 126).  Trustee Dale attended the closing and signed the closing documents (R.T. 122, 142, 640).

 The proceeds received by Exodus Trust for this sale of the farm were wire transferred out of the country. Trustee Dale wanted the funds received from this sale invested in Europe (R.T. 642), so Silkman instructed Nelson to wire the funds to the credit of Cater Allen Bank in Jersey for the account of Avalon Funds (R.T. 129-131, 154). Pursuant to these instructions, Nelson took the Exodus Trust check for the sale proceeds to Norwest Bank and had them wired on October 21, 1991, to the designated account as instructed (R.T. 133, 151-152, 158-160).

 Besides owning the farm, Silkman had owned since 1976 a total of 200 units in the Ludlow Grazing District which allowed him to graze 200 head of cattle on the grazing district's property (R.T. 216, 236). When Exodus Trust received ownership of the farm and decided to sell it, these grazing units had to be sold as well, so real estate broker Nelson attempted to find buyers for these units. Another real estate agent named Don Arithson contacted Nelson and told him that he had buyers for these grazing units, Don Hett and Gerald Burghduff (R.T. 187). On August 14, 1991, a meeting of the Ludlow Grazing District board of directors was conducted and the sale of these grazing units to Hett and Burghduff was approved (R.T. 182, 233). Hett gave a check to Exodus Trust in the amount of $71,875 to buy 125 of these grazing units (R.T. 224-227), and Burghduff bought 75 grazing units for $43,125 (R.T. 213-215) with a check payable to Exodus Trust. The following day, these checks were converted at the First National Bank in Bowman, North Dakota, to a money order in the amount of $115,000 payable to Exodus Trust and this money order was ultimately deposited into an account at the Cater Allen Bank in Jersey (R.T. 395-396).

 The farm equipment and other machinery used in Silkman's farming operation was also conveyed to Exodus Trust (R.T. 579, 641). On September 6, 1991, Silkman on behalf of the trust entered into a contract with C&B Auction Company to auction this equipment (G.Ex. 18, R.T. 241-242, 580, 641) and that sale occurred on October 19, 1991 (R.T. 251, 267). After sales commissions, the net proceeds payable to Exodus Estates was the sum of $258,483.72 (G.Ex. 19, R.T. 243). The proceeds check, dated October 30, 1991, and was presented to Dakota Western Bank for a wire transfer on November 1, 1991 (R.T. 193-194).  Pursuant to Silkman's request, this bank wired the funds to the Phoenix Group in Vienna, Austria (R.T. 191, 196).

 Some cattle branded "Bar U Enterprises" and raised on the Silkman farm was also sold in the fall of 1991. In October, sales of cattle were made to the Lemmon Livestock Company in the amounts of  $43,886.91 (G. Ex. 38) and $65,419.93 (G. Ex. 39) (R.T. 286-289). On October 26, 1991, Silkman used the check for $43,886.91 to obtain from the Dakota Bank two cashier's checks (G. Exs. 40, 41) payable to himself (R.T. 298-299, 307-308). The second of the above checks was used to acquire a cashier's check in the same amount payable to the Exodus Trust (G. Ex. 44, R.T. 302).

 In July, 1991, Silkman had also purchased from the Dakota Bank two cashier's checks (G. Exs. 42, 43), in the amounts of $15,000 and $3534.45 to make investments in two different companies, A Plan K Corporation and AARM Marketing Group (R.T. 300, 314-316, 323); however, these investments proved bad when both companies eventually ceased doing business (R.T. 320-321, 329). But Silkman did make an investment in a company which continues today. One of the above mentioned checks issued by the Dakota Bank for $21,937.45 (G.Ex. 40), was used by Silkman to make a $12,000 investment in a company named Oxyfresh (R.T. 498-499). Silkman sent this check which was greater than the price for the investment to this company, which refunded the difference back to Silkman through a wire transfer (R.T. 502-503).

 In November, 1991, Exodus trust used $65,000 to purchase a series of 13 promissory notes (G.Ex. 48) issued by a grain dealer, Scranton Equity Exchange (R.T. 173, 175), the source for such funds having been derived from a sale of cattle to Lemmon Livestock Company (R.T. 288, 302, 338-340). These demand notes were held until mid-February, 1992, when they were paid and the proceeds deposited into an Exodus Trust account at First National Bank of Bowman (R.T. 404-405). These funds, along with the proceeds from some grain sales made by the trust (R.T. 347-352), were then the subject of a $150,000 wire transfer on February 14, 1992, to the Cater Allen Bank in Jersey (R.T. 403).

 In March, 1992, Silkman had some farm equipment that had not been sold during the auction in October, 1991, so he brought that equipment to a second auction sponsored by C&B Auction Company and this equipment was sold on consignment on March 31 (R.T. 245, 253, 269). Shortly thereafter, C&B Auction received a notice of levy from the IRS dated April 13, 1992 (G.Ex. 21) listing Silkman as the alter ego of Exodus Trust (R.T. 262-263). C&B Auction notified Silkman of the levy, he protested (R.T. 265), but C&B Auction honored the levy and sent a check for $5132.92 (G.Ex. 22) to the IRS (R.T. 261, 264).
 While the evidence in this case showed sales of assets and the transfer of the proceeds offshore, it must also be noted that Avalon Trust (or Funds), operated by a man named Bernard Putts, lost all which was entrusted to its care (R.T. 629-631). But based upon the evidence presented at trial, the jury returned guilty verdicts against Silkman.

 The Government's theory of its case against Silkman may be easily summarized. It contended that Silkman did not file federal income tax returns for the years 1981 through 1985, and this failure allowed it to calculate Silkman's taxes for these years. While the IRS had engaged in litigation in the past with Silkman and had even issued a summons to him and had it enforced, in this particular instance it refused to avail itself of this perfect remedy for obtaining the information it needed to calculate his income taxes. Instead, it relied upon government statistics and Form 1099 information to assert that Silkman owed a very large amount of taxes for these years. In March, 1991, the IRS mailed a statutory notice of deficiency to Silkman, he failed to file a petition with the U.S. Tax Court to challenge this deficiency determination, and this failure to challenge this determination allowed the administrative  assessment of the very large amount of taxes against Silkman on September 16, 1991.

 Naturally, the amount of taxes allegedly due for these years according to the IRS' calculations was just simply a wild guess. From Silkman's viewpoint, during these years he had large losses and the reason why he did not file returns was because he believed that with losses he was not required to file returns. Silkman's beliefs that he did have substantial losses was a provable fact; he meticulously kept most of the records regarding his business expenses incurred during these years and just these records alone demonstrated large expenditures for his farming operation. When these expenses are compared against the income the IRS proclaimed Silkman made during these years, losses are shown for four of the five years at issue. But the losses for the first four of these years are so large that any alleged gain in the last year is negated by loss carryovers. Consequently, Silkman had an excellent case that he owed no taxes and thus could not be convicted of tax evasion.

 While the weaknesses in the Government's case centered around the point of how much taxes, if any, were due, its case regarding an intent on Silkman's part to evade taxes was strong. Succinctly stated, the Government had proof that Silkman owned a large farm which was equipped with lots of farm machinery, and this farm was used to raise cattle and grains. It had plenty of proof which it presented at trial that Silkman suspiciously conveyed his assets away just at that very moment that the IRS was asserting he owed large amounts for taxes. In fact, this sale of the farm and its assets was so timed that most of the funds received from the sale were safely offshore before the IRS started its collection efforts. All that the IRS was ever able to collect was a little more than $5000.

 Against these formidable facts, all Silkman could offer as a defense was his own belief that he owed no taxes for the years in question and that he had no intent to evade taxes he did not owe. To put forward such a defense, Silkman needed to convince the jury that he simply sold his assets to get out of the devastating farming business before he lost his shirt and that this was his sole motivation and intent. Based upon the record presented to the jury, Silkman lost on this score. But what evidence could Silkman have presented to the jury which would have altered the outcome of the trial?

 Silkman was prepared to offer several key documents into evidence which would have supported his contention that he owed no taxes and did not intend to evade taxes. First, he brought to court his expense records for the years 1981 through 1985. These documents, if believed by the jury, would have shown that Silkman had losses during these years and owed no taxes, a critical element of the Government's case which Silkman was entitled to contest. But further, Silkman had obtained through discovery an important document which proved that the IRS' income calculations were truly nothing more than wild guesses, and he had obtained by other means documents indicating that there was no legal assessment made against him on September 16, 1991. But when Silkman offered these very important documents into evidence, the district court abused its discretion and excluded them. The erroneous exclusion of these tendered exhibits are addressed in the first, third and fourth issues in this appeal.

 But also at trial, the Government made absolutely no effort to show what Silkman made during the years 1981 through 1985, although it could have easily done so by calling various witnesses who bought farm produce from Silkman during these years. Instead, the Government relied solely upon the notice of deficiency issued in March, 1991, as proof of what Silkman made in the years 1981 through 1985. After the Government rested its case, Silkman moved for judgment of acquittal on the grounds that the Government had failed to prove an essential element of its case, income for the years 1981 through 1985. While existing decisional authority appears to hold that such proof must be submitted in a tax evasion case, the district court eventually denied this motion. This issue of the propriety of denying this motion is raised in the second issue here and review of this issue, presenting merely a question of law, is de novo.

 Because of the errors which occurred during the trial of this case, Silkman's convictions are due to be reversed.

ISSUE 1: Did the district court err in failing to admit into evidence Silkman's business expenses and deductions for the years 1981 through 1985 to support his position that he owed no federal income taxes?

 The five counts of the indictment filed against Silkman alleged that he owed substantial federal income taxes for the years 1981 through 1985 and that he had attempted during the period from March 21, 1991, through November 25, 1992, to evade payment of those taxes by various means. For example, Count I of the indictment charged Silkman with tax evasion as proscribed by 26 U.S.C., §7201, and this evasion was allegedly committed in the following manner:

The remaining four counts read in the same manner with the exception that a different calendar year was the subject of each separate count and the amount of taxes for that year was likewise different. Count II charged that during the same time period, Silkman had attempted to evade the payment of taxes for 1982 in the amount of $16,230; Count III charged the same evasion of payment for the year 1983 where the alleged tax liability was $15,690, and Count IV charged evasion of the payment of Silkman's 1984 taxes in the amount of $22,291. The final Count V asserted that Silkman attempted to evade payment of his 1985 income taxes which were claimed to be the large sum of $192,283.

 The indictment here charged a very specific type of tax evasion, the evasion of payment of taxes. While 26 U.S.C., §7201, proscribes but the single crime of tax evasion, such crime may be committed in either of two distinct and separate methods. First, a party may attempt to evade the assessment of a tax by acts such as concealing sources of income; see United States v. Waldeck, 909 F.2d 555, 557 (1st Cir. 1990); and United States v. Dack, 747 F.2d 1172, 1174 (7th Cir. 1984). The other method of evasion involves efforts to place assets of a tax debtor beyond the government's reach after a tax liability has been assessed for the purpose of evading collection or payment of those taxes; see United States v. Mal, 942 F.2d 682, 687 (9th Cir. 1991); and United States v. McGill, 964 F.2d 222, 229-30 (3rd Cir. 1992). Clearly, this case involved charges that Silkman attempted to evade the payment of taxes, not their assessment, and the Government admitted as much during trial; see opening statement (R.T. 15-16: "there's affirmative acts that the government alleges were committed by the defendant to avoid the payment of his taxes"); and bench conference with the district court (R.T. 211: "I might ask [the] government what are you proceeding on, one or the other theories or both? Mr. Ulrich: Avoiding payment, Your Honor. The Court: Avoiding payment following assessments? Mr. Ulrich: That's correct, Your Honor"). This theory of prosecution was known in advance of trial by Silkman, who was more than ready to assert his specific defense to this type of tax evasion charge.

 The elements which the government must prove in a tax evasion case are (1) a tax deficiency for any given year that is due and owing; (2) willful refusal to pay such tax by the defendant; and (3) an intent on the defendant's part to evade or defeat payment of the tax which is due; see United States v. Abodeely, 801 F.2d 1020, 1023 (8th Cir. 1986). For purposes of argument of this issue, Silkman does not contest the last two of the above elements. Clearly, there was uncontested proof presented at trial that Silkman had not paid the large amount of taxes which the IRS asserted that he owed; further, there was an abundance of facts presented through many witnesses at trial which indicated that Silkman liquidated his estate and put its proceeds beyond the reach of process for the express purpose of defeating collection of those taxes. What is important for this issue is the first essential element of a tax evasion case, that of a tax due and owing.

 From the beginning of prosecutions for income tax evasion, the defendant has always been permitted to disprove a tax deficiency by offering evidence of unclaimed business expenses and other deductions; see United States v. Link, 202 F.2d 592, 593-94 (3rd Cir. 1953); United States v. Stayback, 212 F.2d 313, 317 (3rd Cir. 1954); United States v. Bender, 218 F.2d 869, 871 (7th Cir. 1955); Elwert v. United States, 231 F.2d 928, 933 (9th Cir. 1956);  Small v. United States, 255 F.2d 604, 606 (1st Cir. 1958); Jones v. United States, 282 F.2d 745, 747 (4th Cir. 1960);  McClanahan v. United States, 292 F.2d 630, 631 (5th Cir. 1961); United States v. Shavin, 320 F.2d 308, 311 (7th Cir. 1963); Siravo v. United States, 377 F.2d 469, 473 (1st Cir. 1967); and United States v. Wilkins, 385 F.2d 465, 470 (4th Cir. 1967)("The principle that a defendant in a tax evasion case is entitled to show that no money was owing to the government in the prosecution year has been widely accepted. Willingham v. United States, 289 F.2d 283, 285-286 (5 Cir.)..."). Submitting proof of business expenses and deductions as a defense to tax evasion charges  was accepted by this court long ago; see Clark v. United States, 211 F.2d 100, 103 (8th Cir. 1954)("If the taxpayer legally has other deductions than those which he has so claimed, it is his privilege to show them and explain them as part of his defense").

 Ignoring for present purposes the very serious problem that the Government never attempted to prove at trial what Silkman's income was for the years 1981 through 1985, there was some evidence of an administrative assertion that his income for these years was $71,182 in 1981; $39,857 in 1982; $40,851 in 1983; $55,045 in 1984; and $395,618 in 1985; see the March 6, 1991 notice of deficiency, G. Ex. 6 (Addendum at 57). From these amounts of income, the IRS calculated the taxes for each year. But if Silkman had business expenses for these years which had not been taken into consideration when the taxes were calculated, he could have offered them into evidence via the rationale of Clark, supra, in an effort to show that little or no taxes were in fact due.

 At trial, Silkman testified that he sat down at the end of each year to review his financial records and make a determination of whether he had made a profit during that year; those records caused Silkman to believe he had losses (R.T. 538-544). Fortunately, Silkman kept most of his actual bills and other expense records that he reviewed at the end of each year and these original records were available at trial. Prior to trial, Silkman created an exhibit of each year's business expenses by placing them in a three-ring notebook, thus these bills for each year were readily viewable in each proposed, multi-page exhibit. These proposed defense exhibits were numbered Exs. 101 through 105, and they each contained a supporting hand written summary of the total expenses, which were as follows: the 1981 expenses were $156,595.91; the 1982 expenses were $145,627.00; the 1983 expenses were $205,803.73; the 1984 expenses were $188,839.38; and the 1985 expenses were $262,848.01 (Addendum at 60-64). Silkman consequently was prepared at trial to offer his defense as allowed by Clark, supra.

 The admission of these exhibits would have completely altered the outcome of this trial and they would have shown the obvious: Silkman was innocent because there was no tax deficiency or tax due and owing. By taking into consideration these business expenses, the following chart could have been presented during trial or in closing:

 1981 expenses: $156,595.91   1982 expenses: $145,627.00    1983 expenses: $205,803.73
            income:    71,182.00               income:    39,857.00               income:    40,851.00
        1981 loss:   $85,413.91           1982 loss: $105,770.00            1983 loss: $164,952.73

 1984 expenses: $188,839.38      1985 income: $395,618.00
            income:     55,045.00            expenses:   262,848.01
         1984 loss: $133,794.38          1985 profit:$132,769.99

The 1984 loss alone exceeds by almost $1000 the gain for 1985, which an accountant or other expert and even a jury instruction could have resolved favorably to Silkman; see 26 U.S.C., §172(b)(1)(B), which allows losses to be carried forward from 5 to 15 years.

 At the end of the second day of trial and in anticipation of the start of the defense on the following day, Silkman delivered copies of proposed defense Exs. 101 through 105 to the district court's law clerk (R.T. 483-484), and the district court inquired about their admissibility during a chambers conference before the start of trial on the third day. The defense shortly explained that their purpose was indeed to establish a lack of tax liability (R.T. 484), to which the Government argued that such exhibits were irrelevant because of the tax assessments which had been made on September 16, 1991; it also argued that attacking the assessments was beyond the purpose of this criminal trial (R.T. 485-486). In essence, the Government contended that "once the tax is assessed, that that is the tax liability" (R.T. 485, lines 18-19). In reply, the defense noted that this issue was addressed in Silkman's written motion for judgment of acquittal (C.R.Doc. #38) which cited "United States against Wilkins, which is a Fourth Circuit case, but it cites to a [the] very last case, cite page 2, Park [sic: Clark] against United States, 211 F.2d 100, a particular part is page 103, Eighth Circuit 154 [1954]" (R.T. 487-488). Nonetheless, the district court accorded conclusive effect to the September 16, 1991, alleged assessment against Silkman and prevented him from offering these exhibits (R.T. 488-489). This was error and Silkman was entitled under Clark, supra, to submit this evidence to the jury for its consideration.

 But further, the rationale for the exclusion of this evidence has no merit. Suppose that  on September 16, 1991, a civil judgment had been entered against Silkman for the alleged taxes in question here. Could such a civil judgment be entered in a criminal case as proof of the challenged fact, which here was that Silkman owed a specified amount as taxes for the years 1981 through 1985? The existing authority declares that a civil judgment cannot be used to prove contested facts in a criminal trial. In United States v. Konovsky, 202 F.2d 721, 726-27 (7th Cir. 1953), the court held that a civil determination cannot be used to establish an element in a criminal case:

See also United States v. Beery, 678 F.2d 856, 868 n. 10 (10th Cir. 1982)("A defendant in a criminal case is not collaterally estopped from raising issues that were determined against him in a prior civil action. In view of the different degrees of proof in civil and criminal cases, the adjudication of a fact in a civil proceeding is not binding in a criminal case under principles of collateral estoppel"); Ferrell v. Pierce, 785 F.2d 1372, 1378 n. 2 (7th Cir. 1986); and United States v. Meza-Soria, 935 F.2d 166, 169 (9th Cir. 1991)("the difference in standard of proof must preclude the use of civil proceeding findings to establish facts in a criminal case"). Further, see Restatement of the Law 2d, Judgments, §28(4), and 47 Am.Jur.2d, Judgments, §739 ("Generally, a judgment rendered in a civil action has no preclusive collateral estoppel effect and is not admissible in a subsequent criminal prosecution where the judgment is offered for the purpose of proving facts adjudicated therein, although exactly the same questions are in dispute in both cases"). Here, there was no such prior civil determination by any court; there was only an administrative determination made by the IRS, which simply cannot be made more conclusive than a civil judgment.

 But further, 26 U.S.C., §6203, which governs the process of making tax assessments, simply cannot be construed as a statute creating a conclusive presumption that taxes are due once assessed. To give conclusive effect to this statute would violate the due process clause and deny Silkman the ability to contest the assessment; see Heiner v. Donnan, 285 U.S. 312, 329, 52 S.Ct. 358 (1932);  Tot v. United States, 319 U.S. 463, 467, 63 S.Ct. 1241 (1943); United States v. Romano, 382 U.S. 136, 139, 86 S.Ct. 279 (1965); Leary v. United States, 395 U.S. 6, 36, 89 S.Ct. 1532 (1969);  Vlandis v. Kline, 412 U.S. 441, 446, 93 S.Ct. 2230, 2233 (1973)("Statutes creating permanent irrebuttable presumptions have long been disfavored under the Due Process Clauses of the Fifth and Fourteenth Amendments");  Baker v. United States, 395 F.2d 368, 370 (8th Cir. 1968);  Stump v. Bennett, 398 F.2d 111, 118 (8th Cir. 1968); United States v. Bowen, 414 F.2d 1268, 1273 (3rd Cir. 1969)("No administrative agency, nor even a legislature, may make the proof of one fact conclusive proof of another fact in any proceeding, civil or criminal, to the detriment of a private party"); United States v. Lake, 482 F.2d 146, 149 (9th Cir. 1973); United States v. Belgrave, 484 F.2d 915 (3rd Cir. 1973); United States v. Boucher, 509 F.2d 991 (8th Cir. 1975); and Allen v. County Court, Ulster County, 568 F.2d 998, 1005 (2nd Cir. 1977). Consequently, §6203 cannot be construed in such a manner as to make tax assessments conclusive even in civil cases; at most, assessments only create a rebuttable, prima facie case that taxes are due. Surely in a criminal case, §6203 can't be construed as creating an irrebuttable presumption;  see Holland v. United States, 348 U.S. 121, 126, 75 S.Ct. 127 (1954) ("Unlike civil actions for the recovery of deficiencies, where the determinations of the Commissioner have prima facie validity, the prosecution must always prove the criminal charge beyond a reasonable doubt").

 In conclusion, similar convictions under similar fact patterns were reversed in Koontz v. United States, 277 F.2d 53 (5th Cir. 1960), and United States v. Moody, 339 F.2d 161 (6th Cir. 1964), and such a result is required here. Because the district court erred by preventing Silkman from offering into evidence Exs. 101 through 105, his convictions must be reversed.

ISSUE 2: Did the district court err in denying Silkman's motion for judgment of acquittal?

 A careful review of the evidence presented by the Government at trial shows that it failed to offer any proof regarding Silkman's income for the years 1981 through 1985. The Government was obligated in this tax evasion case to show a tax due and owing since this fact is an element for this type of prosecution. Such proof could have been presented through witnesses who made payments of income to Silkman for the years 1981 through 1985, or even through bank records for these years. However, proving income was not a part of the Government's theory of its case, which was that an administrative determination of the amount of tax had already been made and this concluded the matter: "once the tax is assessed, that that is the tax liability" (R.T. 485, lines 18-19). However and contrary to the position of the Government, in order to calculate the taxes for these years it was critical for it to prove income first, from which the tax is determined.

 At the conclusion of the Government's case, Silkman moved for judgment of acquittal  on the ground that there had been no evidence presented regarding Silkman's income for these years upon which to calculate a tax (R.T. 483, 486: "the point that I made in my brief for motion for judgment of acquittal is that the government has got to show some predicate foundation for income for the years in question in order for there to be a tax"). In the brief Silkman presented in support of this motion, it was succinctly stated on the first page (C.R.Doc. #38):

See also R.T. 508. The court reserved judgment on this motion (R.T. 490), and Silkman drew the court's attention to it again at the conclusion of all the proof (R.T. 654). However by means of a bench note made after trial, this motion was denied.

 The denial of this Rule 29 motion was error because the Government was indeed required to offer proof at trial as to Silkman's income for the years 1981 through 1985. The requirement to demonstrate in a tax evasion case a defendant's income and thus his tax liability for any given year is shown by several cases. For example, in United States v. Chesson, 933 F.2d 298, 306 (5th Cir. 1991), the defendants made a challenge to the "tax deficiency" element in an evasion case, and the court described the proof requirements as follows:

See also United States v. Hiett, 581 F.2d 1199, 1201 (5th Cir. 1978); and Small v. United States, 255 F.2d 604, 606 (1st Cir.1958)("The government has the burden of proving every element of the crime beyond a reasonable doubt. Holland v. United States, 1954, 348 U.S. 121, 138, 75 S.Ct. 127... One of the basic elements of the offense is an understatement of tax, see Elwert v. United States, 9 Cir., 1956, 231 F.2d 928, and a prerequisite to the imposition of a tax is the establishment of taxable income"). Evidence of intent to evade without proof of income does not establish this offense; see United States v. Bethea, 537 F.2d 1187, 1192 (4th Cir. 1976)("willful intent is irrelevant unless a tax deficiency is established").

 This rule that the Government must prove income in a tax evasion case applies in this circuit. In United States v. Abodeely, 801 F.2d 1020, 1023 (8th Cir. 1986), this court held that "[i]n order to prove a tax deficiency, ‘the government must show first that the taxpayer had unreported income, and second, that the income was taxable...'" This court was even more explicit when it further described this particular element of a tax evasion case:

Thus since the Government here completely failed to establish one of its critical elements of proof, the district court erred when it denied Silkman's motion for judgment of acquittal. For this reason, Silkman's convictions must be reversed.

ISSUE 3: Did the district court err in excluding Silkman's proposed Ex. 106 from admission into evidence?

 As shown above, the Government made no effort to establish or prove what Silkman's income was for the years 1981 through 1985. The closest it came to showing that income appeared in G. Ex. 6, which was the notice of deficiency dated March 6, 1991 (Addendum at 57). That document contained an administrative assertion of Silkman's income for these years, but did not reveal its source for that information. Through discovery, the Government provided to Silkman a document dated October 4, 1990, titled "Income Tax Examination Changes," which contained therein some handwritten Forms 886-A entitled "Explanation of Items." This document demonstrated that the information regarding Silkman's income for the years 1981 through 1985 was based largely upon U.S. Department of Agriculture average yield statistics, in addition to some Forms 1099 information relating to "ACSC" subsidies and other items (Addendum at 65-66). That document stated as follows regarding Silkman's income for the years 1981:

The remainder of this "Explanation of Items" calculated in the same manner Silkman's income for the years 1982 through 1985. Clearly, the basis for these determinations of Silkman's income was nothing more than a wild guess appearing in the form of agriculture statistics. It was these statistics which consequently became the basis for the "income" figures appearing in the notice of deficiency, G. Ex. 6.

 Having obtained this important document through discovery, Silkman attempted to offer it into evidence during trial. He questioned Government witness Wilma Higley about it when she was on the stand (R.T. 89-90). But before the start of the defense, the admissibility of the document was considered in a chambers conference (R.T. 491-494). After argument, the court would not allow admission of D. Ex. 106, apparently because it was being offered to challenge the previous IRS determination regarding the amount of tax, which according to the court could not be questioned in this criminal case (R.T. 494). The denial of admission of this exhibit was error because the document essentially proved that the September 16, 1991, assessment against Silkman was a "naked assessment" which in civil litigation fails to prove an assessment. If a "naked assessment" has no value as evidence of a tax in a civil case, it likewise has no evidentiary value in a criminal case where the assessment is an element of  proof which must be proven beyond a reasonable doubt.

 The relevant law regarding tax assessments was clearly established by the U.S. Supreme Court early in American jurisprudence and consideration of these decisions reveals that tax assessments are not as "ironclad" as the Government and district court asserted in this case. In Den v. Hoboken Land & Improvement Co., 18 How. (59 U.S.) 272, 284 (1856), the Supreme Court held that:

Thus according to Den, when the Government brings an action based upon a tax assessment, all facts regarding that assessment are open to inquiry.

 Later decisions have expressly held that, when the government sues on a bond to secure payment of an assessment, the legality of the assessment is open for judicial determination. In Clinkenbeard v. United States, 21 Wall. (88 U.S.) 65, 70-71 (1874), the government argued that the assessment, not having been appealed, was res judicata and conclusive as to the defendant, who consequently could not show the contrary. The Supreme Court disagreed:

See also United States v. Rindskopf, 105 U.S. 418 (1882)(assessment is only prima facie evidence of amount of taxes due). In Bowers v. American Surety Co., 30 F.2d 244, 245 (2d Cir. 1929), Judge Learned Hand held that "in an action at law to recover a tax, the United States must prove that the tax is due," citing both Clinkenbeard and Rindskopf, although he further concluded that the assessment would be conclusive as to the legality of the tax for purposes of distress or in a suit to enforce a bond given to hold that off. Clearly, when the Government civilly sues a private party based on a tax assessment, that assessment is open to challenge; it logically follows that when it raises the issue of an assessment in criminal proceedings, the assessment is also open to challenge and disproof.

 As a general rule in civil cases, federal tax assessments are considered presumptively correct; see e.g., United States v. Running, 7 F.3d 1293, 1297 (7th Cir. 1993). However, there is an exception to this general rule: when the tax assessment is based upon an under reporting of income as here, there is no such presumption of correctness. Under this exception, if the Government in a civil case fails to connect the claimed tax assessment to some income generating activity of the defendant, it likewise fails to establish its claim of a tax due and owing. If this is the rule for civil cases and ignoring for the moment the use of any presumptions in criminal cases, then surely this same rule must apply in a criminal case, especially when the burden of proof on the Government is far higher in a criminal case.

 Here, the proposed Ex. 106 (Addendum at 65) was offered to demonstrate that the purported assessment of September 16, 1991, was nothing more than "a 'naked' assessment without any foundation whatsoever," which does not even create a prima facie case in civil litigation; see United States v. Janis, 428 U.S. 433, 441-42, 96 S.Ct. 3021 (1976). In Anastasato v. Commissioner, 794 F.2d 884, 887 (3rd Cir. 1986), that court explained:

In civil cases, the presumption of correctness establishes a prima facie case, but it arises only if supported by some foundational evidence connecting the taxpayer with the tax-generating activity. In Zuhone v. Commissioner, 883 F.2d 1317, 1325 (7th Cir. 1989), the court held that while this exception is normally employed in cases of non-reporting of income derived from illegal activity, it is generally accepted that the Commissioner must also provide evidence linking the taxpayer to a legal tax-generating activity before his determination is entitled to the presumption of correctness.

 Here, the IRS assessment against Silkman was not presumptively valid because it was based on an under reporting of income and as a consequence, the Government was required to offer evidence of income to shift the burden of proof in this criminal case to Silkman. But this did not happen here. In Erickson v. Commissioner, 937 F.2d 1548, 1551 (10th Cir. 1991), the court explained the result of a failure to offer some proof of income in a civil case:

 Before the assessment could be presumed valid here, the Government was required to offer some foundational evidence of Silkman's income for the years 1981 through 1985. What evidence could the Government have offered at trial to accord its assessment the presumption of correctness and thereby meet its initial burden? This question was answered in Rapp v. Commissioner, 774 F.2d 932, 935 (9th Cir. 1985): Thus to meet its burden and prove the presumptive correctness of the tax assessment here, the Government was required to offer "some substantive evidence" regarding Silkman's income for the years 1981 through 1985; however, it offered absolutely no evidence and thus did not even carry the burden imposed on it for civil cases.

 A large number of courts have noted this exception to the general rule and they have held that they will examine the basis of the deficiency determination in cases of unreported income. Such precedence clearly holds that under this exception to the general rule, a court must not give effect to the presumption of correctness in a case involving unreported income if the Government cannot present "'some predicate evidence connecting the taxpayer to the charged activity';" see Anastasato v. Commissioner, 794 F.2d at 887.

 Although courts differ on whether the burdens of production and persuasion can be shifted to the Government, most concur that if the presumption of correctness fails for whatever reason, the burden of going forward shifts to the Government. Once it is established that the assessment is arbitrary and erroneous, the burden shifts to the Government to prove the correct amount of any taxes owed. Here, the deficiency assessment against Silkman was arbitrary and erroneous due to the Government's failure to possess some predicate evidence which would create the presumption of correctness. See e.g., Blohm v. Commissioner, 994 F.2d 1542, 1548-1549 (11th Cir. 1993); Erickson v. Commissioner, 937 F.2d 1548, 1551 (10th Cir. 1991); Oliver v. United States, 921 F.2d 916, 923-24 (9th Cir. 1990) (Judge Reinhardt, concurring); United States v. Stonehill, 702 F.2d 1288, 1293 (9th Cir. 1983); Weimerskirch v. Commissioner, 596 F.2d 358, 361 (9th Cir. 1979); Day v. Commissioner, 975 F.2d 534, 537 (8th Cir. 1992); Zuhone v. Commissioner, 883 F.2d 1317, 1326-1327 (7th Cir. 1989); Ruth v. United States, 823 F.2d 1091, 1094 (7th Cir. 1987) (government must show that its assessment has a "rational foundation" before the presumption of correctness will be recognized); United States v. Walton, 909 F.2d 915, 918-919 (6th Cir. 1990); United States v. Besase, 623 F.2d 463, 465 (6th Cir. 1980); Sharwell v. Commissioner, 419 F.2d 1057, 1060 (6th Cir. 1969); Weir v. Commissioner, 283 F.2d 675, 679 (6th Cir. 1960) ("the law imposes much less of a burden upon a taxpayer who is called upon to prove a negative--that he did not receive the income which the Commissioner claims--than it imposes upon a taxpayer who is attempting to sustain a deduction on his income tax return"); Portillo v. Commissioner, 932 F.2d 1128, 1133 (5th Cir. 1991); Williams v. Commissioner, 999 F.2d 760, 764 (4th Cir. 1993); Gerardo v. Commissioner, 552 F.2d 549, 553 (3d Cir. 1977); Llorente v. Commissioner, 649 F.2d 152, 156 (2nd Cir. 1981); Pizzarello v. United States, 408 F.2d 579, 583 (2nd Cir. 1969); Senter v. Commissioner, T.C. Memo 1995-311 [70 CCH TCM 54]; Dellacroce v. Commissioner, 83 T.C. 269 (1984); Jackson v. Commissioner, 73 T.C. 394 (1979).

 It is obvious that a naked assessment without any foundation is arbitrary and erroneous; see United States v. Janis, supra. This is the law in at least nine Circuits and has in fact been the law since at least 1935. In Helvering v. Taylor, 293 U.S. 507, 55 S.Ct. 287 (1935), the Commissioner determined a deficiency of $9,156.69 on account of respondent's 1928 income tax and the Board of Tax Appeals made the same determination. But on appeal, the circuit court held it excessive and concluded that the evidence did not show the correct amount; it thus reversed the order of the Board and remanded the case for further proceedings in accordance with the opinion. The petition for writ to the Supreme Court stated the question to be presented as follows:

 The facts before the Court in Helvering concerned the cost basis for the purchase of stock. In Helvering, the taxpayer had failed to establish the correct amount to be assigned to the preferred stock as its cost to him, and the point considered was whether the circuit court erred in reversing and remanding for further proceedings in accordance with its opinion. The Commissioner's contention was that the burden on the taxpayer was not only to prove that the Commissioner's determination was erroneous, but also to show the correct amount of the tax: The Supreme Court rejected all of the Commissioner's contentions: Clearly, Helvering is the source of the rule that once a taxpayer shows a tax determination to be erroneous, the burden shifts to the government to prove the amount of tax due.

 Several appellate courts have also addressed this issue and followed the rationale of Helvering. In Portillo v. Commissioner, 932 F.2d 1128, 1133-34 (5th Cir. 1991), that court examined the burden of proof in various forms of tax litigation, and determined that the need for tax collection does not serve to excuse the government from providing some factual foundation for its tax assessments:

 The second appellate decision of this case, Portillo v. Commissioner, 988 F.2d 27 (5th Cir. 1993), found that attorney fees were justified since the government's position had not been reasonable in the Tax Court litigation:  The Fourth Circuit has also thoroughly discussed how the burdens of proof are allocated in cases of this nature; see Cebollero v. Commissioner, 967 F.2d 986 (4th Cir. 1992). Because the burden-shifting mechanism and its competent and relevant evidence standard have been frequently misunderstood, the court in Cebollero explained its approach in allocating the burden of proof in civil deficiency cases:  Later, the Fourth Circuit in Williams v. Commissioner, 999 F.2d 760 (4th Cir. 1993), cited approvingly the other decisions concerning "naked assessments:"  In a series of decisions beginning with Stout v. Commissioner, 273 F.2d 345, 350 (4th Cir. 1959), the Fourth Circuit had developed this separate, subordinate procedural scheme under which the burden of production during the first phase of the suit can shift to the government. In Stout, that court held:  The Fourth Circuit later revisited the question of the means by which the taxpayer may overcome the "presumption of correctness" in Foster v. Commissioner, 391 F.2d 727 (4th Cir. 1968). In Higginbotham v. United States, 556 F.2d 1173, 1176 (4th Cir. 1977), Chief Judge Haynsworth, the author of Stout, reformulated the approach taken in Foster: The court in Cebollero, 967 F.2d, at 991, recounted what it had stated in Higginbotham:  In summary, there are many cases which have held that an assessment like the one here dated September 16, 1991, is nothing more than a "naked" assessment which will not even be enforced civilly; proof of that "nakedness" is derived from Silkman's proposed Ex. 106. If such an assessment is invalid for civil purposes, it is equally invalid here where the burden of proof clearly fell upon the Government.

 If this had been a proceeding in Tax Court, Silkman would have prevailed in his argument that the assessment was invalid. If the Government had proceeded in such a hypothetical tax court case like it did here with no evidence of Silkman's income for the years 1981 through 1985, all Silkman would have been required to do would have been to offer this particular exhibit. Under the rationale of Senter v. Commissioner, T.C. Memo 1995-311, the foundation for the assessment against Silkman based upon the Department of Agriculture statistics would have fallen. Under Portillo, supra, that part of the assessment based upon the unsubstantiated Forms 1099 would have fallen. Just with this single exhibit alone (Addendum at 65-66), Silkman would have shown in tax court proceedings that this assessment was arbitrary and erroneous. If after offering such proof the Government had failed to offer further proof regarding what Silkman actually owed in the way of income taxes for 1981 through 1985, the Government's claim would have been dismissed because such "proof" did not measure up to a "preponderance of the evidence" regarding a tax being due and owing.

 It is not suggested that these unique rules of tax court procedure can be applied directly to the burdens imposed upon the Government in criminal cases. In tax court, the Commission enters court with an automatic "presumption of correctness" regarding the conclusions he has drawn, but these "presumptions" cannot likewise be available to the Government in a criminal prosecution. However, assuming for the present that these unique procedural rules are useful for analogy purposes here, it is clear that under the facts of this case, the Government's proof would not have been sufficient to prove a tax due and owing by a preponderance of the evidence.  In this case, a tax due and owing was an element which the Government was required to prove beyond a reasonable doubt; obviously, evidence which the courts hold does not measure up to a preponderance of the evidence cannot be proof beyond a reasonable doubt.

 Ex. 106 (Addendum at 65-66) was an important admission that the September 16, 1991, assessment against Silkman was a "naked" one. Its use at trial would have been to show the jury that the Government only had wild guesses about Silkman's income for these years; but more importantly, this exhibit would have provided an additional ground for Silkman's motion for judgment of acquittal. But in any event, refusal to admit this exhibit into evidence was  prejudicial, reversible error.

ISSUE 4: Did the district court err in denying admission of Silkman's proposed Ex. 107 into evidence?

 The Government's proof at trial that Silkman had been assessed taxes for the years 1981 through 1985 was shown through G. Exs. 1 through 5, which are commonly called Certificates of Assessments and Payments (R.T. 33-38). However, knowing that tax assessments are actually executed upon IRS documents known as Forms 23C or RACS 006, Silkman made some Freedom of Information Act requests prior to trial seeking production of those actual assessment documents which theoretically would show that he was in fact assessed specific amounts as income taxes for the years 1981 through 1985. The IRS responded to his FOIA request by letter dated March 20, 1997, and that letter constituted an admission that Silkman had not really been assessed the taxes in question (Addendum at 67).

 This FOIA request secured the production of a document named "Summary Record of Assessments" dated September 16, 1991, and it was signed by an assessment officer named Janet Boyer, who was employed by the IRS' Ogden Service Center. While there are many extremely large assessments made against groups of individuals and other entities on this form, there was nothing which indicated that Silkman himself had actually been assessed on this date. The cover letter which accompanied this document made this clear: "Please be advised that these reports are a summary record of assessment and do not identify specific taxpayers by name. They are an aggregation of taxes, interest, and penalties assessed against taxpayers on a given day" (Addendum at 67). Without a doubt, this document contained an important admission that Silkman had not been assessed on September 16, 1991, and thus this evidence was directly useful for impeaching G. Exs. 1 through 5.

 The question of the admissibility of this exhibit arose during a chambers conference at the start of the third day of trial. Silkman proposed the admission into evidence of this answer to his FOIA request which contained the "assessment document" for September 16, 1991 (R.T. 492-494); but after argument, the district court denied its admission apparently on the same grounds that it had denied admission of Silkman's Ex. 106 (R.T. 494). This was error.

 The making of tax assessments is a matter governed by the Internal Revenue Code. There, Congress has specified the essential steps for the creation of a tax assessment and a tax lien arising from unpaid taxes. Section 6201 and 26 C.F.R., §301.6201-1, provide that the Secretary or his delegate is authorized to make inquiries, determinations, and assessments of all taxes imposed under the Internal Revenue Code. After preliminary steps, when the Secretary believes that the taxpayer has not paid all or any part of his income taxes, the Secretary or his delegate mails a notice of deficiency to the taxpayer by certified or registered mail; see 26 U.S.C., §6212(a). Once this notice has been mailed, the taxpayer has ninety (90) days in which to file a petition for redetermination of the tax deficiency with the U.S. Tax Court; see 26 U.S.C. §6213.

 The notice of deficiency, sometimes called a "ninety day" letter, is the "ticket to Tax Court" to litigate the merits of the deficiency determination, and it is a jurisdictional prerequisite to a suit in that forum; see Robinson v. United States, 920 F.2d 1157 (3rd Cir. 1991); McPartlin v. Commissioner, 653 F.2d 1185 (7th Cir. 1981); Granquist v. Hackleman, 264 F.2d 9 (9th Cir. 1959); Steiner v. Nelson, 259 F.2d 853 (7th Cir. 1958); Enochs v. Muse, 270 F.2d 528 (5th Cir. 1959); and Heinemann Chemical Co. v. Heiner, 92 F.2d 344 (3rd Cir. 1937). Until ninety days have elapsed, the Secretary can neither make an assessment nor utilize court procedures for collection--except in a jeopardy case. If the taxpayer files a petition with the Tax Court in that period, the restraint upon assessment by the Secretary continues until the decision of the Tax Court becomes final; see 26 U.S.C., §6213(a). When the Tax Court's decision becomes final, the Secretary must make a tax assessment and issue the §6303(a) "notice and demand" as required by 26 U.S.C., §6215.

 The assessment process regarding federal income taxes is a matter controlled by statutes and regulations. In the 1954 and 1986 Internal Revenue Codes, §6201(a) authorizes the Secretary of the Treasury to make assessments. The method of recording such an administrative act is governed by §6203, which provides:

The specific tax regulation concerning the assessment process is 26 C.F.R., §301.6203-1, which reads in pertinent part:  In Internal Revenue Manual 5312(1), MT 5300-1 (11-15-85), this assessment process is further clarified: Thus, by the Service's own admission in its IR Manual, "[t]he assessment lists support the assessment certificate..."  Pursuant to Fed.R.Evid. 801(d)(2)(D), this is a party admission that an assessment list must exist; see United States v. Van Griffin, 874 F.2d 634, 638 (9th Cir. 1989)(government manuals admissible as party admissions under Fed.R.Evid. 801(d)(2)(D)). There can be no dispute that the assessment list is the supporting record and is absolutely essential before a valid assessment is made. Further, the regulation contemplates a signed document. This is consistent with the supporting statute which provides that the taxpayer is entitled to a copy, which implies that a hard copy exists.

 In addition to the above IRM provision which shows that Form 23-C is the assessment form, established decisional authority also shows that a tax assessment is made upon Form 23-C. For example, in Meyersdale Fuel Co. v. United States, 44 F.2d 437, 443 (Ct.Cl. 1930), this form was mentioned:

 In Brafman v. United States, 384 F.2d 863 (5th Cir. 1967), there was also a demonstration of how tax assessments are executed upon Form 23-C. There, the government sought to attach liability for unpaid estate taxes to an heir of that estate under a transferee liability theory. But, Mrs. Brafman argued that she was not so liable because the assessment certificate relevant in that case was unsigned. In agreeing with that argument and holding the certificate at issue void, that court stated: See also Stallard v. United States, 806 F.Supp. 152, 158 (W.D.Tex. 1992)("Defendant submitted a 'Form 23C' which it asserts is a summary record of assessment").

 Several cases disclose the type of information which must be contained on a Form 23-C tax assessment record and its supporting list. For example, in Ianelli v. Long, 329 F.Supp. 1241, 1242 (W.D.Pa. 1971), that description of the various data was as follows:

In Planned Investments, Inc. v. United States, 881 F.2d 340, 343 (6th Cir. 1989), the court examined the requirements of 26 C.F.R., §301.6203-1, and stated: Finally, the court in Robinson v. United States, 920 F.2d 1157, 1158 (3rd Cir. 1990), described the assessment process as:  Therefore, from the above authority, the documents which are executed in making an assessment are clearly known. First, the assessment is made on a Form 23-C. This assessment form may apply either to a single individual or a group. The supporting documentation for a Form 23-C is the assessment lists, which must contain (1) the identification of the taxpayer; (2) character of liability assessed; (3) taxable period, if applicable; and (4) amount of the assessment. If these documents do not exist, the absence proves that there has been no assessment and consequently, no tax collection activities may be pursued.

 The theory of prosecution in this case was that Silkman committed a specific type of income tax evasion known as evasion of the payment of the tax, which required proof that he was in fact assessed specific amounts of income taxes for the years 1981 through 1985 on September 16, 1991. What constitutes those assessment documents is known through existing statutes, regulations and decisions of the courts. Silkman sought through the Freedom of Information Act those documents and the reply he received clearly indicated that he had not been assessed in the manner required by law. The actual assessment document dated September 16, 1991, failed to identify that Silkman himself had been assessed specific amounts as federal income taxes for the years 1981 through 1985. This reply, D.Ex. 107 (Addendum at 67-69), was the perfect rebuttal to the Government's proof that he had been assessed and it was error not to allow admission of D.Ex. 107. See United States v. Goodlow, 500 F2d 954 (8th Cir. 1974)(witness' statements that another committed crime held error to exclude); United States v. Popenas, 780 F.2d 545 (6th Cir. 1985)(denial of impeachment evidence constituted reversible error); United States v. Lueben, 812 F.2d 179 (5th Cir. 1987)(denial of expert testimony caused reversal); United States v. Alexander, 816 F.2d 164 (5th Cir. 1987)(reversal for refusal to admit excellent rebuttal evidence).

 For the reasons expressed above, Silkman's convictions herein are due to be reversed.

 Respectfully submitted this the 16th day of January, 1998.
 
 

I hereby certify that I have this date served two copies of the forgoing brief upon the below named counsel for the United States by depositing the same in the United States mail, postage prepaid, in an envelope addressed to him at his correct mailing address:

 John Ulrich
 U.S. Attorney's Office
 P.O. Box 5073
 Sioux Falls, S.D. 57117-5073

Dated this the 16th day of January, 1998.
 
 


 


Note: The brief for the United States is separately posted here. The following is my reply brief I submitted in response to the government's brief.

                                 IN THE UNITED STATES COURT OF APPEALS FOR
                                                        THE EIGHTH CIRCUIT

                                                        Case No. 97-3888SDRC
                                ___________________________________________________

                                                UNITED STATES OF AMERICA,

                                                                    Appellee,

                                                                        v.

                                                    ELTON HOWARD SILKMAN,

                                                                    Appellant.
                                ___________________________________________________

                                ON APPEAL FROM A JUDGMENT OF CONVICTION
                                BEFORE THE UNITED STATES DISTRICT COURT
                                    FOR THE DISTRICT OF SOUTH DAKOTA
                                RICHARD H. BATTEY, DISTRICT JUDGE PRESIDING
                                 ___________________________________________________

                                REPLY BRIEF OF APPELLANT ELTON SILKMAN
                                ___________________________________________________
 

                                                                               Lowell H. Becraft, Jr.
                                                                               Attorney for Silkman
                                                                               209 Lincoln Street
                                                                               Huntsville, Alabama 35801
 
 

                                                    ARGUMENT IN REPLY

ISSUE 1: Did the district court err in failing to admit into evidence Silkman's business expenses and deductions for the years 1981 through 1985 to support his position that he owed no federal income taxes?

 There is but one crime of tax evasion proscribed by 26 U.S.C., §7201. While this principle should seem obvious, in United States v. Dack, 747 F.2d 1172, 1174 (7th Cir. 1984), that court unfortunately stated in apparent dicta that §7201 proscribed two separate crimes of tax evasion in this single statute. Upon this premise, a law firm in Phoenix, Arizona, which regularly represents parties charged with tax crimes, MacPherson and McCarville, started asserting that indictments charging tax evasion were duplicitous, but this contention was rejected in United States v. Dunkel, 900 F.2d 105 (7th Cir. 1990), and United States v. Mal, 942 F.2d 682 (9th Cir. 1991). It is for this reason that courts have concluded that §7201 makes penal but one crime which may be committed in at least two different ways. One method of tax evasion exhibited by the cases involves charges that the defendant attempted to evade the ascertainment or assessment of taxes; another method of committing tax evasion is by attempting to evade the collection of taxes after assessment. The former type of tax evasion is the most common while the latter type of prosecution is rare.

 The typical evasion of assessment cases involve common fact patterns. Suppose that  in a hypothetical case the defendant conducted a used car business. Suppose that he filed his income tax return for a particular year but omitted on that return some large amounts of income, which resulted in his indictment for tax evasion. In such a case, the prosecution would offer the defendant's banking records to show that his total receipts were more than he had reported on his return. These missing and unreported receipts would show additional taxes due and the implication of such a fact pattern is that the defendant deliberately omitted the unreported income to evade assessment of additional taxes. But also suppose in this hypothetical case that the defendant was not only forgetful about his receipts but also his expenses. If these unclaimed business expenses approximate or exceed the amount of unreported receipts, it would be obvious that while his return was perhaps false, he had not committed tax evasion because there is no additional tax due. The courts have acknowledged that a defendant in circumstances like this may offer his unclaimed deductions into evidence to demonstrate that no more taxes are due; see Clark v. United States, 211 F.2d 100 (8th Cir. 1954). Of course, this proof of unclaimed additional expenses presents solely a jury question of whether there are in fact additional taxes due.

 This type of defense is not limited to just businessmen. Suppose that a wage earner filed an incorrect return which omitted some of his income, such as large amount of interest  paid by a bank or dividends paid by a corporation. In such a case, if the defendant had also incurred deductible but unreported items such as mortgage interest payments, medical expenses or other similar deductions, he could offer such evidence under the authority of Clark to disprove that additional taxes were due.

 Prosecutions for tax evasion committed by efforts to evade tax assessment not only involve fact patterns of incorrect returns but also cases where no returns have been filed at all. Suppose that a wage earner decides for whatever reason that he is not required to file income tax returns and based upon this belief he submits to his employer an exempt Form W-4 to prevent income tax withholding. This typical fact pattern is one which is the subject of prosecutions for evading assessment of the tax; see United States v. Davenport, 824 F.2d 1511 (7th Cir. 1987). But even in such a case, if the wage earner also has deductions which could reduce or eliminate the taxes, he may claim them as allowed by Clark, supra.

 The question presented in this issue is whether the Clark type defense is also available to a defendant charged with tax evasion by attempting to evade collection of the taxes purportedly assessed by the IRS. In this appeal, Silkman has argued that pursuant to United States v. Abodeely, 801 F.2d 1020 (8th Cir. 1986), the government has a duty in all tax evasion cases to prove the amount of taxes owed, whether the fact pattern be that of evading assessment or evading collection of taxes claimed to have been assessed. To prove the amount of taxes which are due, the Government has a duty under Abodeely to prove what the defendant's income was for the years at issue in order to show or calculate the taxes due. But further, Silkman maintains that he can pursuant to the Clark defense offer business expenses to show that no additional taxes are due and Abodeely seems to acknowledge that this defense is indeed available in this type of prosecution. However, the Government in its brief denies this.

 Presuming that Abodeely does not address this question, Silkman notes that the error of the Government's argument lies in its contention that tax assessments are conclusively correct and may not be rebutted, which is an erroneous argument; see Blackston v. United States, 778 F.Supp. 244, 246 (D.Md. 1991). If this had been a civil case and the Government had sued Silkman to reduce this claimed assessment to judgment and had offered into evidence claimed assessment documents like those here, Certificate of Assessments and Payments (Forms 4340), Silkman would have been allowed the opportunity to contest the assessments. These Certificates of Assessments and Payments only create in a civil case a prima facie, rebuttable presumption of taxes due; see United States v. Chila, 871 F.2d 1015, 1018 (11th Cir. 1989); and Hughes v. United States, 953 F.2d 531, 540 (9th Cir. 1992). But as noted in the discussion of the third issue in Silkman's opening brief, in unreported income cases like that here, the government must not only offer the assessment, but it must show some minimal factual foundation of income to support the claimed tax assessment; see United States v. Stonehill, 702 F.2d 1288, 1293 (9th Cir. 1983). If Silkman had been sued in such a hypothetical civil case, he could have offered the exhibits which he attempted here to offer to show that no tax was due. Why can't this be done in a criminal case where the Government's burden of proof is far higher?

 The Government in its brief asserts that, since this claimed tax assessment of September 16, 1991, was made pursuant to provisions of the Internal Revenue Code, all it needed to do to prove the amount of taxes due was to offer its claimed assessment documents; see its brief at pages 8 and 9. Silkman acknowledges that via 26 U.S.C., §§ 6201, 6202, and 6203, the IRS has authority to make assessments, but he also points out that it is unconstitutional to construe §6203 as creating a conclusive, irrebuttable presumption. Here the Government's argument that it made an assessment via the provisions of the tax code falls apart because it ignores other provisions of the Code regarding the predicate statutory requirements and acts preceding that of assessment. To make an assessment in a case like this, the IRS must first canvass the internal revenue districts to locate people like Silkman "who may be liable to pay any internal revenue tax;" see the summons authority sections of the Code, 26 U.S.C., §§ 7601, etc. The collection of evidence regarding amounts of income is obviously essential to calculate any tax. Once evidence of income is acquired, the IRS must in a case like this issue a notice of deficiency; see 26 U.S.C., §6212(a). A tax deficiency is defined via 26 U.S.C., §6211 as the amount of tax imposed by the Code which exceeds the amount shown on a return. This difference in amount of tax is the subject of the notice of deficiency and a taxpayer has 90 days within which to file a petition with the Tax Court. After the proceeding in the Tax Court is concluded or after the lapse of 90 days without the filing of such a petition, the tax is then assessed via §6203.

 In cases charging a defendant with evading assessment of income tax, the Government will show what the defendant earned as income in any given year, which is essential to calculate the amount of tax due pursuant to the terms of the Code (the "specific item" method of proof). In such a case, the Government calls employers as witnesses for the purpose of testifying about monies paid to the defendant and it might even offer banking records into evidence to prove the defendant's income. Usually, some IRS agent also testifies at trial that a particular amount of income tax is consequently due and unpaid based upon the income proven at trial. Of course, if there are acts committed by the defendant like trying to hide his income or even claiming exempt from withholding of taxes, a case for tax evasion is made. This method shows, pursuant to the provisions of the tax code, how the tax is due as a matter of law.

 The same facts and method of proof are used to prove evasion of payment. In such a case, the Government will call the same types of employer and banking witnesses to prove what the defendant's income was, and it will offer some IRS agent to testify about the amount of taxes due. If there is also proof that the defendant was concealing his assets or transferring them away either to others or out of the country, then the classic case for evading payment is shown. But it must also be remembered that under either of the above scenarios, such a defendant would be allowed to show any deductions to reduce the amount of tax. Some defendants might be able to offer such proof while others might simply have no deductions to show. But in any event, this defense is available.

 But in this case, the Government never did as it contends in its brief follow the provisions of the tax code. While it was required to show that it canvassed the internal revenue districts and found evidence of income for which Silkman owed a tax, such proof was not offered. While it needed to prove income in order to show the amount of tax, this proof was avoided and the Government here just simply offered its notice of deficiency and some claimed documents which imply that some other internal revenue documents exist which show the assessment of September 16, 1991. Clearly, the Government here did not follow the statutory procedures for calculating the tax, hence the error of its argument. It seems to argue that when it fails to offer proof of income as it is required to do, then such deficiency in its case prevents a party like Silkman from countering that no tax is due because of extraordinary expenses.

 The cases of United States v. Dack, 747 F.2d 1172 (7th Cir. 1984), United States v. Daniel, 956 F.2d 540 (9th Cir. 1992), and United States v.  Voorhies, 658 F.2d 710 (9th Cir. 1981), are illustrative of the proposition upon which the Government relies here that, if it shows the calculation of a tax via statutory procedures, it has proven the amount of tax due. But these cases require careful analysis. In United States v. England, 347 F.2d 425 (7th Cir. 1965), the Government admitted that it was required to show an assessment in an evasion of payment criminal prosecution. It was this principle in England which became the basis for the argument made in Dack, where Dack was charged with evasion of assessment or ascertainment arising from his failure to file a return. Dack argued that to be prosecuted, there needed to be an assessment to prove the tax deficiency; but this argument was rejected by the court because, the Government having proved what Dack's income was, the tax could be calculated without the actual assessment. See also Daniel and United States v. Hogan, 861 F.2d 312 (1st Cir. 1988). The difference in these cases and that of Silkman's is that in these other cases, the Government offered evidence of the defendant's income; here, that did not happen.

 In summary, Silkman's position is that in all tax evasion cases, whether evasion of assessment (ascertainment) or payment, the Government must prove the tax due and the defendant has a defense of showing deductions to prove that there is no actual tax due. The Government's reply to this argument, as predicted in Silkman's opening brief, is that its assessment concludes the issue and no proof may be offered regarding expenses and other deductions. In order to make this argument, the Government must assert that assessments are conclusive, yet the cases cited by both parties show that assessments are only prima facie evidence of tax due. If assessments are rebuttable as the cases show and the Government here acknowledges, then Silkman had every right to offer his deductions to show no tax due. And no court may via jury instructions conclude this matter; see Psaty v. United States, 442 F.2d 1154 (3rd Cir. 1971), where an instruction like that given here and upon which the Government relies was found erroneous.

 These tendered exhibits were critical to show that no taxes were owed by Silkman, a critical element of proof needed to establish this evasion case. The admission of these exhibits would have entirely altered the outcome of this trial and thus a fundamental and substantial right of Silkman was abridged when the district court abused its discretion and refused their admission. For this reason, Silkman's convictions must be reversed.

ISSUE 2: Did the district court err in denying Silkman's motion for judgment of acquittal?

 As mentioned in both Silkman's opening brief, the Government's brief and the above discussion, the Government never attempted durin