United States v. Silkman, 156 F.3d 833 (8th Cir. 1998)
(posted Aug. 28, 2017)

Elton Silkman’s story may be shortly explained. He was a South Dakota farmer who kept his farming expenses in a shoe box, organized by year. He may very well have had losses for the years 1980 through 1985, and consequently did not file federal income tax returns. However, using Bureau of Labor Statistics, the IRS claimed that he owed income taxes for these years and sent him a notice of deficiency. Silkman failed to challenge these alleged deficiencies in Tax Court and the IRS assessed taxes against him for these years.

Shortly before the IRS made attempts to collect these assessed taxes, Elton decided to get out of the farming business. After meeting a trust salesman, he formed several trusts and transferred his farming assets to them. He then sold all of his land, farming equipment and cattle, and the proceeds were deposited into bank accounts of the trusts. All of this was done just prior to the IRS attempting collection, and the IRS only secured about 5,000 bux from levies. Thereafter, the funds held by the trusts were transferred by the trustee to bank accounts in Europe, from which they were mysteriously “lost.” I never believed the “lost” story, but Elton did to the very end. Such is the effect of deception.  

Elton was indicted for tax evasion because he allegedly transferred his assets to defeat payment of the taxes assessed against him. At trial, the prosecution contended that the tax assessments against Elton were conclusive and could not be challenged during trial. I, however, wanted to do exactly that: show what the IRS claimed was the “income” for each year, and then offer the expenses incurred for each year as a demonstration that Elton really had losses, and that there really was no tax due and owing for these years. Proof in this respect was offered from the “shoe box.” However, the district court excluded this evidence and Elton was convicted.

On appeal, the Court of Appeals for the 8th Circuit reversed Elton’s convictions because of the exclusion of this evidence.

It took an appeal to solve some of Elton’s problems. But he still lost his farm to a trust promoter.