Removal or Concealment with Intent to Defraud in Violation of Section 7206(4)

Title 26, United States Code, Section 7206(4), makes it a crime to remove or conceal goods with intent to evade or defeat the assessment of tax and provides as follows:

Any person who --

(4)...Removes, deposits, or conceals, or is concerned in removing, depositing, or concealing, any goods or commodities for or in respect whereof any tax is or shall be imposed, or any property upon which levy is authorized by section 6331, with intent to evade or defeat the assessment or collection of any tax imposed by this title...shall be guilty of a felony and, upon conviction thereof, shall be fined...or imprisoned not more than 3 years, or both, together with the costs of prosecution.

In order for the government to prove a case of removal or concealment with intent to defraud under § 7206(4), three elements must exist beyond a reasonable doubt:

1. an individual removed, deposited, or concealed, or was concerned in removing, depositing, or concealing,

2. goods or commodities for which, or in response of which, a tax is or shall be imposed, or any property upon which levy is authorized,

3. with the intent to evade or defeat the assessment or collection of any tax imposed by Title 26.

This section is rarely used, as violations of this type are generally charged under § 7201, § 7206(1), or § 7212(a). However, because a violation of § 7206(4) does not require proof of tax due or the filing of a document, it can be used, for example, in situations where an individual conceals assets subject to levy.

Removes, Deposits, or Conceals

The first element the government must prove is that an individual removed, deposited, or concealed, or was concerned in removing, depositing, or concealing.

This statute covers not only the individual who directly removes, deposits, or conceals goods, commodities, or property, but also anyone "concerned in" such acts. Also, while certainly relating to physical removal, deposit, or concealment, the statute is more broadly interpreted to include any means by which an individual attempts to prevent detection or awareness of certain items on which "a tax is or shall be imposed, or any property upon which levy is authorized."

For example: An individual prepares a document falsely stating that certain assets subject to levy were stolen, when in fact the assets remain in the possession of the individual. Although said assets were not physically removed, deposited, or concealed, the effect of the false document was to conceal the fact the assets remained in the possession of the individual and prevent levy action.

Tax Imposed or Levy Authorized

The second element the government must prove is goods or commodities for which, or in response of which, a tax is or shall be imposed, or any property upon which levy is authorized has been removed, deposited, or concealed.

If an individual is charged with violation of this statute where tax is or shall be imposed, the fraudulent actions may have been committed prior to the time the tax was due.

However, if an individual is charged with a violation of this statute where levy is authorized, it has been held that the fraudulent actions must have occurred after tax was assessed and the individual refused to pay the tax after demand.

Evade or Defeat

The third element the government must prove is intent to evade or defeat assessment or collection of tax. A prosecution under § 7206(4) does not require proof of willfulness.

Although, the possibilities for acts designed to deceive or hide in an attempt to evade assessment or collection of tax are boundless, a few examples are as follows:

  • placing assets in the name of others after levy action commences,
  • selling assets after levy action commences and using the proceeds for things other than payment of tax debt,
  • secreting assets in safety deposit boxes, and
  • concealment of income.

Venue

The venue, for purposes of prosecution of removal or concealment with intent to defraud under §7206(4), is in the district in the act of concealment took place. Venue may also be proper in the district where the return was filed.

Statute of Limitations

The statute of limitations for violations of § 7206(4) is three years.

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