U.S. v. Francisco, 614 F.2d 617 (8th Cir. 1980)
UNITED STATES of America, Appellee,
v.
Harold L. FRANCISCO, Appellant.United States Court of Appeals,
Eighth Circuit.
Decided Feb. 6, 1980.
Rehearing Denied Feb. 27, 1980.

	Before GIBSON, Chief Judge, (FN*) and LAY and McMILLIAN, Circuit judges.

	LAY, Circuit Judge.

	In March, 1979, an indictment was returned against Harold L. Francisco, charginghim with three counts of willful failure to file an income tax return for the tax years 1972,1973 and 1974, in violation of 26 U.S.C. s 7203.  Francisco waived jury trial; his casewas tried to the district court, the Honorable Donald E. O'Brien presiding, which foundhim guilty on all three counts.  He was sentenced to one year in prison on each count,the sentences to be served concurrently.

	On appeal Francisco argues the Government failed to prove every element of thecrime charged; that he was denied effective assistance of counsel; and that the federalincome tax is unconstitutional.

Sufficiency of evidence.

	Francisco's basic contention that the Government failed to prove the receipt ofgross income sufficient to require the filing of a return under 26 U.S.C. s 6012 is withoutmerit.  Francisco stipulated to receiving "gross compensation on sales" for each year inquestion in amounts in excess of $21,000.  These figures were calculated by subtractingthe cost of goods sold from total sales.  Gross income for merchants is the amountrepresenting gross receipts less the cost of goods sold.  See United States v. Ballard, 535F.2d 400, 404‑05 (8th Cir.), cert. denied, 429 U.S. 918, 97 S.Ct. 310, 50 L.Ed.2d 283(1976); Treas.Reg. s 1.61‑3 (1979).  The stipulated amounts are sufficient to require thereporting of such income.

	It is also contended these "gross compensation" figures do not represent grossincome because they have not been adjusted by other items which may be excluded fromgross income.  The Government's only burden, however, is to establish that grossreceipts exceed the cost of goods sold by an amount sufficient to trigger the reportingrequirements.  The burden then shifts to the taxpayer to come forward with evidence ofoffsetting expenses.  See Siravo v. United States, 377 F.2d 469, 473 (1st Cir. 1967).

Willfulness.

	Next Francisco argues the Government did not prove he acted with an evil motiveor purpose, and therefore failed to establish the element of willfulness.  Willfulness underthe tax code requires only proof of an intentional violation of a known legal duty.  SeeUnited States v. Rifen, 577 F.2d 1111, 1113 (8th Cir. 1978); United States v. Pohlman,522 F.2d 974 (8th Cir. 1975), cert. denied, 423 U.S. 1049, 96 S.Ct. 776, 46 L.Ed.2d 638(1976), cited with approval in United States v. Pomponio, 429 U.S. 10, 12‑13, 97 S.Ct.22, 23‑24, 50 L.Ed.2d 12 (1976).  Evidence of IRS attempts to explain legalrequirements to him, as well as Francisco's prior tax paying history, and the testimonyof Rex Scott, former IRS special agent, regarding Francisco's involvement in the taxprotest movement, and Gladys Houseman, the individual who prepared his income taxreturns from 1963 through 1971, clearly establish Francisco was aware of his legalobligation and intentionally chose not to comply.  See United States v. Rifen, 577 F.2dat 1113.

	Because his returns contain "some information," Francisco urges the filingrequirements were satisfied.  However, his returns contain no income information fromwhich tax liability can be calculated.  Hence, they do not satisfy filing requirements.  SeeUnited States v. Pryor, 574 F.2d 440, 442 (8th Cir. 1978); United States v. Rifen, 577F.2d 1111 (8th Cir. 1978).

Assistance of counsel.

	At a pre‑trial hearing before a United States Magistrate, Francisco indicated hewould like assistance of counsel.  When questioned further, he stated that he knew hiscase best and expected to do the talking, but would like appointment of a lawyer toadvise him.  Accordingly, Thomas M. Kelly was appointed to assist him.

	Francisco now argues he was denied effective assistance of counsel.  Thisargument fails for two reasons.  First, the record clearly indicates Mr. Kelly competentlyassisted Francisco; he advised him on all substantive and procedural matters, crossexamined witnesses and interposed numerous objections.  Second, even though Kellyadmitted he didn't completely understand Francisco's challenge to the constitutionalityof the income tax, Francisco was clearly not prejudiced.  The district court afforded himwide latitude in presenting and exploring his constitutional theories, and even requesteddefense witnesses to clarify their testimony in order that he might fully understand theconstitutional defense.  The contention that Francisco was denied effective assistance ofcounsel is therefore, without merit.  See Nevels v. Parratt, 596 F.2d 344, 346 (8th Cir.1979).

Constitutional argument.

	Francisco's challenge is premised upon two theories: (1) the income tax is anindirect tax; and (2) income received in exchange for labor or services is not incomewithin the meaning of the Sixteenth Amendment.

	The cases cited by Francisco clearly establish that the income tax is a direct tax,thus refuting the argument based upon his first theory.  See Brushaber v. Union PacificRailroad Co., 240 U.S. 1, 19, 36 S.Ct. 236, 242, 60 L.Ed. 493 (1916) (the purpose ofthe Sixteenth Amendment was to take the income tax "out of the class of excises, dutiesand imposts and place it in the class of direct taxes").

	Francisco's conviction was based upon receipt of stipulated amounts representingcompensation from the sale of goods.  His challenge based upon income received fromlabor or services is therefore inapposite.  In any event, it is clear Congress intended totax income from whatever source derived.  See Brushaber v. Union Pacific Railroad Co.,240 U.S. at 18, 36 S.Ct. at 241.

	Francisco stipulated to receiving amounts representing gross proceeds less costs,which constitute gains.  See United States v. Ballard, 535 F.2d at 404.  Thus, by his ownadmission Francisco received taxable income.

	We find this appeal frivolous.

	Judgment affirmed.

FN* The Honorable Floyd R. Gibson was Chief Judge of the Eighth Circuit at the timethis case was submitted and took senior status on December 31, 1979, before the opinionwas filed.