(Slip Opinion) OCTOBER TERM, 2007 1
Syllabus
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
being done in connection with this case, at the time the opinion is issued.
The syllabus constitutes no part of the opinion of the Court but has been
prepared by the Reporter of Decisions for the convenience of the reader.
See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES
Syllabus
BOULWARE v. UNITED STATES
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE NINTH CIRCUIT
No. 06–1509. Argued January 8, 2008—Decided March 3, 2008
One element of tax evasion under 26 U. S. C. §7201 is “the existence of
a tax deficiency.” Sansone v. United States, 380 U. S. 343, 351. Peti
tioner Boulware was charged with criminal tax evasion and filing a
false income tax return for diverting funds from a closely held corpo
ration, HIE, of which he was the president, founder, and controlling
shareholder. To support his argument that the Government could
not establish the tax deficiency required to convict him, Boulware
sought to introduce evidence that HIE had no earnings and profits in
the relevant taxable years, so he in effect received distributions of
property that were returns of capital, up to his basis in his stock,
which are not taxable, see 26 U. S. C. §§301 and 316(a). Under
§301(a), unless the Internal Revenue Code requires otherwise, a “dis
tribution of property” “made by a corporation to a shareholder with
respect to its stock shall be treated in the manner provided in
[§301(c)].” Section 301(c) provides that the portion of the distribution
that is a “dividend,” as defined by §316(a), must be included in the
recipient’s gross income; and the portion that is not a dividend is, de
pending on the shareholder’s basis for his stock, either a nontaxable
return of capital or a taxable capital gain. Section 316(a) defines “di
vidend” as a “distribution” out of “earnings and profits.” The District
Court granted the Government’s in limine motion to bar evidence
supporting Boulware’s return-of-capital theory, relying on the Ninth
Circuit’s Miller decision that a diversion of funds in a criminal tax
evasion case may be deemed a return of capital only if the taxpayer
or corporation demonstrates that the distributions were intended to
be such a return. The court later found Boulware’s proffer of evi
dence insufficient under Miller and declined to instruct the jury on
his theory. In affirming his conviction, the Ninth Circuit held that
2 BOULWARE v. UNITED STATES
Syllabus
Boulware’s proffer was properly rejected under Miller because he of
fered no proof that the amounts diverted were intended as a return of
capital when they were made.
Held: A distributee accused of criminal tax evasion may claim return-
of-capital treatment without producing evidence that, when the dis
tribution occurred, either he or the corporation intended a return of
capital. Pp. 6–17.
(a) Tax classifications like “dividend” and “return of capital” turn
on a transaction’s “objective economic realities,” not “the particular
form the parties employed.” Frank Lyon Co. v. United States, 435
U. S. 561, 573. In economic reality, a shareholder’s informal receipt
of corporate property “may be as effective a means of distributing
profits among stockholders as the formal declaration of a dividend,”
Palmer v. Commissioner, 302 U. S. 63, 69, or as effective a means of
returning a shareholder’s capital, see ibid. Economic substance re
mains the touchstone for characterizing funds that a shareholder di
verts before they can be recorded on a corporation’s books. Pp. 6–8.
(b) Miller’s view that a return-of-capital defense requires evidence
of a corresponding contemporaneous intent sits uncomfortably not
only with the tax law’s economic realism, but also with the particular
wording of §§301 and 316(a). As these sections are written, the tax
consequences of a corporation’s distribution made with respect to
stock depend, not on anyone’s purpose to return capital or get it back,
but on facts wholly independent of intent: whether the corporation
had earnings and profits, and the amount of the taxpayer’s basis for
his stock. The Miller court could claim no textual hook for its con
temporaneous intent requirement, but argued that it avoided sup
posed anomalies. The court, however, mistakenly reasoned that ap
plying §§301 and 316(a) in criminal cases unnecessarily emphasizes
the deficiency’s amount while ignoring the willfulness of the intent to
evade taxes. Willfulness is an element of the crimes because the sub
stantive provisions defining tax evasion and filing a false return ex
pressly require it, see, e.g., §7201. Nothing in §§301 and 316(a) re
lieves the Government of the burden of proving willfulness or
impedes it from doing so if there is evidence of willfulness. The
Miller court also erred in finding it troublesome that, without a con
temporaneous intent requirement, a shareholder distributee would
be immune from punishment if the corporation had no earnings and
profits but convicted if the corporation did have earning and profits.
An acquittal in the former instance would in fact result merely from
the Government’s failure to prove an element of the crime. The fact
that a shareholder of a successful corporation may have different tax
liability from a shareholder of a corporation without earnings and
profits merely follows from the way §§301 and 316(a) are written and
Cite as: 552 U. S. ____ (2008) 3
Syllabus
from §7201’s tax deficiency requirement. Even if there were compel
ling reasons to extend §7201 to cases in which no taxes are owed,
Congress, not the Judiciary, would have to do the rewriting. Pp. 8–
12.
(c) Miller also suffers from its own anomalies. First, §§301 and 316
are odd stalks for grafting a contemporaneous intent requirement.
Correct application of their rules will often become possible only at
the end of the corporation’s tax year, regardless of the shareholder or
corporation’s understanding months earlier when a particular distri
bution may have been made. Moreover, §301(a), which expressly
provides that distributions made with respect to stock “shall be
treated in the manner provided in [§301(c)],” ostensibly provides for
all variations of tax treatment of such distributions unless a separate
Code provision requires otherwise. Yet Miller effectively converts the
section into one of merely partial coverage, leaving the tax status of
one class of distributions in limbo in criminal cases. Allowing §61(a)
of the Code, which defines gross income, “[e]xcept as otherwise pro
vided,” as “all income from whatever source derived,” to step in where
§301(a) has been pushed aside would sanction yet another eccentric
ity: §301(a) would not cover what it says it “shall,” (distributions with
respect to stock for which no more specific provision is made), while
§61(a) would have to apply to what by its terms it should not (a re
ceipt of funds for which tax treatment is “otherwise provided” in
§301(a)). Miller erred in requiring contemporaneous intent, and the
Ninth Circuit’s judgment here, relying on Miller, is likewise errone
ous. Pp. 12–14.
(d) This Court declines to address the Government’s argument that
the judgment should be affirmed on the ground that before any dis
tribution may be treated as a return of capital, it must first be dis
tributed to the shareholder “with respect to . . . stock.” The facts in
this case have not been raked over with that condition in mind, and
any canvas of evidence and Boulware’s proffer should be made by a
court familiar with the entire evidentiary record. Nor will the Court
take up in the first instance the question whether an unlawful diver
sion may ever be deemed a “distribution . . . with respect to [a corpo
ration’s] stock.” Pp. 14–17.
470 F. 3d 931, vacated and remanded.
SOUTER, J., delivered the opinion for a unanimous Court.
Cite as: 552 U. S. ____ (2008) 1
Opinion of the Court
NOTICE: This opinion is subject to formal revision before publication in the
preliminary print of the United States Reports. Readers are requested to
notify the Reporter of Decisions, Supreme Court of the United States, Wash
ington, D. C. 20543, of any typographical or other formal errors, in order
that corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
_________________
No. 06–1509
_________________
MICHAEL H. BOULWARE, PETITIONER v.
UNITED STATES
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE NINTH CIRCUIT
[March 3, 2008]
JUSTICE SOUTER delivered the opinion of the Court.
Sections 301 and 316(a) of the Internal Revenue Code
set the conditions for treating certain corporate distribu
tions as returns of capital, nontaxable to the recipient. 26
U. S. C. §§301, 316(a) (2000 ed. and Supp. V.). The ques
tion here is whether a distributee accused of criminal tax
evasion may claim return-of-capital treatment without
producing evidence that either he or the corporation in
tended a capital return when the distribution occurred.
We hold that no such showing is required.
I
“[T]he capstone of [the] system of sanctions . . . calcu
lated to induce . . . fulfillment of every duty under the
income tax law,” Spies v. United States, 317 U. S. 492, 497
(1943), is 26 U. S. C. §7201, making it a felony willfully to
“attemp[t] in any manner to evade or defeat any tax im
posed by” the Code.1 One element of tax evasion under
§7201 is “the existence of a tax deficiency,” Sansone v.
——————
1 A related provision, 26 U. S. C. §7206(1), criminalizes the willful
filing of a tax return believed to be materially false. See n. 9, infra.
2 BOULWARE v. UNITED STATES
Opinion of the Court
United States, 380 U. S. 343, 351 (1965); see also Lawn v.
United States, 355 U. S. 339, 361 (1958),2 which the Gov
ernment must prove beyond a reasonable doubt, see ibid.
(“[O]f course, a conviction upon a charge of attempting to
evade assessment of income taxes by the filing of a fraud-
ulent return cannot stand in the absence of proof of a
deficiency”).
Any deficiency determination in this case will turn on
§§301 and 316(a) of the Code. According to §301(a), unless
another provision of the Code requires otherwise, a “dis
tribution of property” that is “made by a corporation to a
shareholder with respect to its stock shall be treated in
the manner provided in [§301(c)].” Under §301(c), the
portion of the distribution that is a “dividend,” as defined
by §316(a), must be included in the recipient’s gross in
come; and the portion that is not a dividend is, depending
on the shareholder’s basis for his stock, either a nontax
able return of capital or a gain on the sale or exchange of
stock, ordinarily taxable to the shareholder as a capital
gain. Finally, §316(a) defines “dividend” as
“any distribution of property made by a corporation to
its shareholders—
“(1) out of its earnings and profits accumulated af
ter February 28, 1913, or
“(2) out of its earnings and profits of the taxable
year (computed as of the close of the taxable year
without diminution by reason of any distributions
made during the taxable year), without regard to the
amount of the earnings and profits at the time the
——————
2 “[T]he elements of §7201 are willfulness[,] the existence of a tax
deficiency, . . . and an affirmative act constituting an evasion or at
tempted evasion of the tax.” Sansone v. United States, 380 U. S. 343,
351 (1965). The Courts of Appeals have divided over whether the
Government must prove the tax deficiency is “substantial,” see United
States v. Daniels, 387 F. 3d 636, 640–641, and n. 2 (CA7 2004) (collect
ing cases); we do not address that issue here.
Cite as: 552 U. S. ____ (2008) 3
Opinion of the Court
distribution was made.”
Sections 301 and 316(a) together thus make the existence
of “earnings and profits”3 the decisive fact in determining
the tax consequences of distributions from a corporation to
a shareholder with respect to his stock. This requirement
of “relating the tax status of corporate distributions to
earnings and profits is responsive to a felt need for pro
tecting returns of capital from tax.” 4 Bittker & Lokken
¶92.1.1, p. 92–3.
II
In this criminal tax proceeding, petitioner Michael
Boulware was charged with several counts of tax evasion
and filing a false income tax return, stemming from his
diversion of funds from Hawaiian Isles Enterprises (HIE),
a closely held corporation of which he was the president,
founder, and controlling (though not sole) shareholder. At
trial,4 the United States sought to establish that Boulware
had received taxable income by “systematically divert[ing]
funds from HIE in order to support a lavish lifestyle.” 384
F. 3d 794, 799 (CA9 2004). The Government’s evidence
showed that
——————
3 Although the Code does not “comprehensively define ‘earnings and
profits,’ ” 4 B. Bittker & L. Lokken, Federal Taxation of Income, Estates
and Gifts ¶92.1.3, p.92–6 (3d ed. 2003) (hereinafter Bittker & Lokken),
the “[p]rovisions of the Code and regulations relating to earnings and
profits ordinarily take taxable income as the point of departure,” id., at
92–9.
4 The trial at issue in this case was actually Boulware’s second trial
on §§7201 and 7206(1) charges, his convictions on those counts in an
earlier trial having been vacated by the Ninth Circuit for reasons not at
issue here, see 384 F. 3d 794 (2004). In that earlier trial, Boulware was
also convicted of conspiracy to make false statements to a federally
insured financial institution, in violation of 18 U. S. C. §371. The Ninth
Circuit affirmed Boulware’s conspiracy conviction that first time
around, however, so the present trial did not include a conspiracy
charge.
4 BOULWARE v. UNITED STATES
Opinion of the Court
“[Boulware] gave millions of dollars of HIE money to
his girlfriend . . . and millions of dollars to his wife . . .
without reporting any of this money on his personal
income tax returns. . . . [H]e siphoned off this money
primarily by writing checks to employees and friends
and having them return the cash to him, by diverting
payments by HIE customers, by submitting fraudu
lent invoices to HIE, and by laundering HIE money
through companies in the Kingdom of Tonga and
Hong Kong.” Ibid.
In defense, Boulware sought to introduce evidence that
HIE had no retained or current earnings and profits in the
relevant taxable years, with the consequence (he argued)
that he in effect received distributions of property that
must have been returns of capital, up to his basis in his
stock. See §301(c)(2). Because the return of capital was
nontaxable, the argument went, the Government could not
establish the tax deficiency required to convict him.
The Government moved in limine to bar evidence in
support of Boulware’s return-of-capital theory, on the
grounds of “irrelevan[ce] in [this] criminal tax case,” App.
20. The Government relied on the Ninth Circuit’s decision
in United States v. Miller, 545 F. 2d 1204 (1976), in which
that court held that in a criminal tax evasion case, a di
version of funds may be deemed a return of capital only
after “some demonstration on the part of the taxpayer
and/or the corporation that such [a distribution was]
intended to be such a return,” id., at 1215. Boulware, the
Government argued, had offered to make no such demon
stration. App. 21.
The District Court granted the Government’s motion,
and when Boulware sought “to present evidence of [HIE’s]
alleged over-reporting of income, and an offer of proof
relating to the issue of . . . dividends,” id., at 135, the
District Court denied his request. The court said that
Cite as: 552 U. S. ____ (2008) 5
Opinion of the Court
“[n]ot only would much of [his proffered] evidence be ex
cludable as expert legal opinion, it is plainly insufficient
under the Miller case,” id., at 138, and accordingly de
clined to instruct the jury on Boulware’s return-of-capital
theory. The jury rejected his alternative defenses (that
the diverted funds were nontaxable corporate advances or
loans, or that he used the moneys for corporate purposes),
and found him guilty on nine counts, four of tax evasion
and five of filing a false return.
The Ninth Circuit affirmed. 470 F. 3d 931 (2006). It
acknowledged that “imposing an intent requirement cre
ates a disconnect between civil and criminal liability,” but
thought that under Miller, “the characterization of di
verted corporate funds for civil tax purposes does not
dictate their characterization for purposes of a criminal
tax evasion charge.” 470 F. 3d, at 934. The court held the
test in a criminal case to be “whether the defendant has
willfully attempted to evade the payment or assessment of
a tax.” Ibid. Because Boulware “ ‘presented no concrete
proof that the amounts were considered, intended, or
recorded on the corporate records as a return of capital at
the time they were made,’ ” id., at 935 (quoting Miller,
supra, at 1215), the Ninth Circuit held that Boulware’s
proffer was “properly rejected . . . as inadequate,” 470
F. 3d, at 935.
Judge Thomas concurred because the panel was bound
by Miller, but noted that “Miller—and now the majority
opinion—hold that a defendant may be criminally sanc
tioned for tax evasion without owing a penny in taxes to
the government.” 470 F. 3d, at 938. That, he said, not
only “indicate[s] a logical fallacy, but is in flat contradic
tion with the tax evasion statute’s requirement . . . of a tax
deficiency.” Ibid. (internal quotation marks omitted).5
——————
5 Judge Thomas went on to say that the Government would prevail
even without Miller’s rule because, in his view, Boulware’s diversions
6 BOULWARE v. UNITED STATES
Opinion of the Court
We granted certiorari, 551 U. S. ___ (2007), to resolve a
split among the Courts of Appeals over the application of
§§301 and 316(a) to informally transferred or diverted
corporate funds in criminal tax proceedings.6 We now
vacate and remand.
III
A
The colorful behavior described in the allegations re
quires a reminder that tax classifications like “dividend”
and “return of capital” turn on “the objective economic
realities of a transaction rather than . . . the particular
form the parties employed,” Frank Lyon Co. v. United
States, 435 U. S. 561, 573 (1978); a “given result at the end
of a straight path is not made a different result . . . by
following a devious path,” Minnesota Tea Co. v. Helvering,
302 U. S. 609, 613 (1938).7 As for distributions with re
——————
were “unlawful,” and the return-of-capital rules would not apply to
diversions made for unlawful purposes. See 470 F. 3d, at 938–939.
6 As noted, the Ninth Circuit holds that §§301 and 316(a) are not to be
consulted in a criminal tax evasion case until the defendant produces
evidence of an intent to treat diverted funds as a return of capital at
the time it was made. See 470 F. 3d 931 (2006) (case below). By
contrast, the Second Circuit allows a criminal defendant to invoke
§§301 and 316(a) without evidence of a contemporaneous intent to treat
such moneys as returns of capital. See United States v. Bok, 156 F. 3d
157, 162 (1998) (“[I]n return of capital cases, a taxpayer’s intent is not
determinative in defining the taxpayer’s conduct”). Meanwhile, the
Third, Sixth, and Eleventh Circuits arguably have taken the position
that §§301 and 316(a) are altogether inapplicable in criminal tax cases
involving informal distributions. See United States v. Williams, 875
F. 2d 846, 850–852 (CA11 1989); United States v. Goldberg, 330 F. 2d
30, 38 (CA3 1964); Davis v. United States, 226 F. 2d 331, 334–335 (CA6
1955); but see Brief for Petitioner 16 (“[T]hese cases can be read to
address the allocation of the burden of proof on the return of capital
issue, rather than the applicable substantive principles”).
7 We have also recognized that “[t]he legal right of a taxpayer to de
crease the amount of what otherwise would be his taxes, or altogether
avoid them, by means which the law permits, cannot be doubted.”
Cite as: 552 U. S. ____ (2008) 7
Opinion of the Court
spect to stock, in economic reality a shareholder’s informal
receipt of corporate property “may be as effective a means
of distributing profits among stockholders as the formal
declaration of a dividend,” Palmer v. Commissioner, 302
U. S. 63, 69 (1937), or as effective a means of returning a
shareholder’s capital, see ibid. Accordingly, “[a] distribu
tion to a shareholder in his capacity as such . . . is subject
to §301 even though it is not declared in formal fashion.”
B. Bittker & J. Eustice, Federal Income Taxation of Cor
porations and Shareholders ¶8.05[1], pp. 8–36 to 8–37 (6th
ed. 1999) (hereinafter Bittker & Eustice); see also Gard
ner, The Tax Consequences of Shareholder Diversions in
Close Corporations, 21 Tax L. Rev. 223, 239 (1966) (here
inafter Gardner) (“Sections 316 and 301 do not require any
formal path to be taken by a corporation in order for those
provisions to apply”).
There is no reason to doubt that economic substance
remains the right touchstone for characterizing funds
received when a shareholder diverts them before they can
be recorded on the corporation’s books. While they “never
——————
Gregory v. Helvering, 293 U. S. 465, 469 (1935). The rule is a two-way
street: “while a taxpayer is free to organize his affairs as he chooses,
nevertheless, once having done so, he must accept the tax consequences
of his choice, whether contemplated or not, . . . and may not enjoy the
benefit of some other route he might have chosen to follow but did not,”
Commissioner v. National Alfalfa Dehydrating & Milling Co., 417 U. S.
134, 149 (1974); see also id., at 148 (referring to “the established tax
principle that a transaction is to be given its tax effect in accord with
what actually occurred and not in accord with what might have oc
curred”); Founders Gen. Corp. v. Hoey, 300 U. S. 268, 275 (1937) (“To
make the taxability of the transaction depend upon the determination
whether there existed an alternative form which the statute did not tax
would create burden and uncertainty”). The question here, of course, is
not whether alternative routes may have offered better or worse tax
consequences, see generally Isenbergh, Review: Musings on Form and
Substance in Taxation, 49 U. Chi. L. Rev. 859 (1982); rather, it is
“whether what was done . . . was the thing which the statute[, here
§§301 and 316(a),] intended,” Gregory, supra, at 469.
8 BOULWARE v. UNITED STATES
Opinion of the Court
even pass through the corporation’s hands,” Bittker &
Eustice ¶8.05[9], p. 8–51, even diverted funds may be seen
as dividends or capital distributions for purposes of §§301
and 316(a), see Truesdell v. Commissioner, 89 T. C. 1280
(1987) (treating diverted funds as “constructive” distribu
tions in civil tax proceedings). The point, again, is that
“taxation is not so much concerned with the refinements of
title as it is with actual command over the property
taxed—the actual benefit for which the tax is paid.” Corl
iss v. Bowers, 281 U. S. 376, 378 (1930); see also Griffiths
v. Commissioner, 308 U. S. 355, 358 (1939).8
B
Miller’s view that a criminal defendant may not treat a
distribution as a return of capital without evidence of a
corresponding contemporaneous intent sits uncomfortably
not only with the tax law’s economic realism, but with the
particular wording of §§301 and 316(a), as well. As those
sections are written, the tax consequences of a “distribu
tion by a corporation with respect to its stock” depend, not
on anyone’s purpose to return capital or to get it back, but
on facts wholly independent of intent: whether the corpo
ration had earnings and profits, and the amount of the
taxpayer’s basis for his stock. Cf. Truesdell v. Commis
sioner, Internal Revenue Service (IRS) Action on Decision
1988–25, 1988 WL 570761 (Sept. 12, 1988) (recommenda
tion regarding acquiescence); IRS Non Docketed Service
——————
8 Thus in the period between this Court’s decisions in Commissioner
v. Wilcox, 327 U. S. 404 (1946) (holding embezzled funds to be nontax
able to the embezzler) and James v. United States, 366 U. S. 213 (1961)
(overruling Wilcox, holding embezzled funds to be taxable income), the
Government routinely argued that diverted funds were “constructive
distributions,” taxable to the recipient as dividends. See generally
Gardner 237 (“While Wilcox was good law, the safest way to insure that
both the corporation and the shareholder would be taxed on their
respective gain from the diverted funds was to label them dividends”); 4
Bittker & Lokken ¶92.2(7), p. 92–23, n. 37.
Cite as: 552 U. S. ____ (2008) 9
Opinion of the Court
Advice Review, 1989 WL 1172952 (Mar. 15, 1989) (reply to
request for reconsideration) (“[I]ntent is irrelevant. . . .
[E]very distribution made with respect to a shareholder’s
stock is taxable as ordinary income, capital gain, or not at
all pursuant to section 301(c) dependent upon the corpora
tion’s earnings and profits and the shareholder’s stock
basis. The determination is computational and not de
pendent upon intent”).
When the Miller court went the other way, needless to
say, it could claim no textual hook for the contemporane
ous intent requirement, but argued for it as the way to
avoid two supposed anomalies. First, the court thought
that applying §§301 and 316(a) in criminal cases unneces
sarily emphasizes the exact amount of deficiency while
“completely ignor[ing] one essential element of the crime
charged: the willful intent to evade taxes . . . .” 545 F. 2d,
at 1214. But there is an analytical mistake here. Willful
ness is an element of the crimes charged because the
substantive provisions defining tax evasion and filing a
false return expressly require it, see §7201 (“Any person
who willfully attempts . . . ”); §7206(1) (“Willfully makes
and subscribes . . . ”). The element of willfulness is ad
dressed at trial by requiring the Government to prove it.
Nothing in §§301 and 316(a) as written (that is, without
an intent requirement) relieves the Government of this
burden of proving willfulness or impedes it from doing so if
evidence of willfulness is there. Those two sections as
written simply address a different element of criminal
evasion, the existence of a tax deficiency, and both defi
ciency and willfulness can be addressed straightforwardly
(in jury instructions or bench findings) without tacking an
intent requirement onto the rule distinguishing dividends
from capital returns.
Second, the Miller court worried that if a defendant
could claim capital treatment without showing a corre
sponding and contemporaneous intent,
10 BOULWARE v. UNITED STATES
Opinion of the Court
“[a] taxpayer who diverted funds from his close corpo
ration when it was in the midst of a financial diffi
culty and had no earnings and profits would be im
mune from punishment (to the extent of his basis in
the stock) for failure to report such sums as income;
while that very same taxpayer would be convicted if
the corporation had experienced a successful year and
had earnings and profits.” 545 F. 2d, at 1214.
“Such a result,” said the court, “would constitute an ex
treme example of form over substance.” Ibid. The Circuit
thus assumed that a taxpayer like Boulware could be
convicted of evasion with no showing of deficiency from an
unreported dividend or capital gain.
But the acquittal that the author of Miller called form
trumping substance would in fact result from the Gov
ernment’s failure to prove an element of the crime. There
is no criminal tax evasion without a tax deficiency, see
supra, at 1–2,9 and there is no deficiency owing to a distri
——————
9 Boulware was also convicted of violating §7206(1), which makes it a
felony “[w]illfully [to] mak[e] and subscrib[e] any return, statement, or
other document, which contains or is verified by a written declaration
that it is made under the penalties of perjury, and which [the taxpayer]
does not believe to be true and correct as to every material matter.” He
argues that if the Ninth Circuit erred, its error calls into question not
only his §7201 conviction, but his §7206(1) conviction as well. Brief for
Petitioner 15–16. Although the Courts of Appeals are unanimous in
holding that §7206(1) “does not require the prosecution to prove the
existence of a tax deficiency,” United States v. Tarwater, 308 F. 3d 494,
504 (CA6 2002); see also United States v. Peters, 153 F. 3d 445, 461
(CA7 1998) (collecting cases), it is arguable that “the nature and char
acter of the funds received can be critical in determining whether . . .
§7206(1) has been violated, [even if] proof of a tax deficiency is unnec
essary,” 1 I. Comisky, L. Feld, & S. Harris, Tax Fraud & Evasion
¶2.03[5], p. 21 (2007); see also Brief for Petitioner 15–16. The Govern
ment does not argue that Boulware’s §§7201 and 7206(1) convictions
should be treated differently at this stage of the proceedings, however,
and we will accede to the Government’s working assumption here that
the §§7201 and 7206(1) convictions stand or fall together.
Cite as: 552 U. S. ____ (2008) 11
Opinion of the Court
bution (received with respect to a corporation’s stock) if a
corporation has no earnings and profits and the value
distributed does not exceed the taxpayer-shareholder’s
basis for his stock. Thus the fact that a shareholder dis
tributee of a successful corporation may have different tax
liability from a shareholder of a corporation without earn
ings and profits merely follows from the way §§301 and
316(a) are written (to distinguish dividend from capital
return), and from the requirement of tax deficiency for a
§7201 crime. Without the deficiency there is nothing but
some act expressing the will to evade, and, under §7201,
acting on “bad intentions, alone, [is] not punishable,”
United States v. D’Agostino, 145 F. 3d 69, 73 (CA2 1998).
It is neither here nor there whether the Miller court was
justified in thinking it would improve things to convict
more of the evasively inclined by dropping the deficiency
requirement and finding some other device to exempt
returns of capital.10 Even if there were compelling reasons
to extend §7201 to cases in which no taxes are owed, it
bears repeating that “[t]he spirit of the doctrine which
denies to the federal judiciary power to create crimes
forthrightly admonishes that we should not enlarge the
reach of enacted crimes by constituting them from any
thing less than the incriminating components contem
plated by the words used in the statute,” Morissette v.
——————
10 “A better [method of exempting returns of capital from taxation]
could no doubt be devised.” 4 Bittker & Lokken ¶92.1.1, p. 92–3; see
ibid. (suggesting, for example, that “all receipts from a corporation
could be treated as taxable income, and a correction for any resulting
overtaxation could be made in computing gain or loss when stock is
sold, exchanged, or becomes worthless”); see also Andrews, “Out of its
Earnings and Profits”: Some Reflections on the Taxation of Dividends,
69 Harv. L. Rev. 1403, 1439 (1956) (criticizing the earnings and profits
concept “[a]s a device for separating income from return of capital,” and
suggesting that “[d]istributions which ought to be treated as return of
capital [could] be brought within the concept of a partial liquidation by
special provision”).
12 BOULWARE v. UNITED STATES
Opinion of the Court
United States, 342 U. S. 246, 263 (1952) (opinion for the
Court by Jackson, J.). If §301, §316(a), or §7201 could
stand amending, Congress will have to do the rewriting.
C
Not only is Miller devoid of the support claimed for it,
but it suffers the demerit of some anomalies of its own.
First and most obviously, §§301 and 316 are odd stalks for
grafting a contemporaneous intent requirement, given the
fact that the correct application of their rules will often
become known only at the end of the corporation’s tax
year, regardless of the shareholder’s or corporation’s un
derstanding months earlier when a particular distribution
may have been made. Section 316(a)(2) conditions treat
ing a distribution as a constructive dividend by reference
to earnings and profits, and earnings and profits are to be
“computed as of the close of the taxable year . . . without
regard to the amount of the earnings and profits at the
time the distribution was made.” A corporation may make
a deliberate distribution to a shareholder, with everyone
expecting a profitable year and considering the distribu
tion to be a dividend, only to have the shareholder end up
liable for no tax if the company closes out its tax year
in the red (so long as the shareholder’s basis covers the
distribution); when such facts are clear at the time the
reporting forms and returns are filed,11 the shareholder
does not violate §7201 by paying no tax on the moneys
received, intent being beside the point. And since intent to
make a distribution a taxable one cannot control, it would
——————
11 Sometimes these facts are not clear, and in certain circumstances
a corporation may be required to assume it is profitable. For ex-
ample, the instructions to IRS Form 1099–DIV provide that when a
corporation is unsure whether it has sufficient earnings and profits
at the end of the taxable year to cover a distribution to shareholders,
“the entire payment must be reported as a dividend.” See
http://www.irs.gov/pub/irs-pdf/i1099div.pdf (as visited Feb. 15, 2008,
and available in Clerk of Court’s case file).
Cite as: 552 U. S. ____ (2008) 13
Opinion of the Court
be odd to condition nontaxable return-of-capital treatment
on contemporaneous intent, when the statute says nothing
about intent at all.
The intent interpretation is strange for another reason,
too (a reason in some tension with the Ninth Circuit’s
assumption that an unreported distribution without con
temporaneous intent to return capital will support a con
viction for evasion). The text of §301(a) ostensibly pro
vides for all variations of tax treatment of distributions
received with respect to a corporation’s stock unless a
separate provision of the Code requires otherwise. Yet
Miller effectively converts the section into one of merely
partial coverage, with the result of leaving one class of
distributions in a tax status limbo in criminal cases. That
is, while §301(a) expressly provides that distributions
made by a corporation to a shareholder with respect to its
stock “shall be treated in the manner provided in
[§301(c)],” under Miller, a distribution from a corporation
without earnings and profits would fail to be a return of
capital for lack of contemporaneous intent to treat it that
way; but to the extent that distribution did not exceed the
taxpayer’s basis for the stock (and thus become a capital
gain), §301(a) would leave the distribution unaccounted
for.
It is no answer to say that §61(a) of the Code would step
in where §301(a) has been pushed out. Although §61(a)
defines gross income, “[e]xcept as otherwise provided,” as
“all income from whatever source derived,” the plain text
of §301(a) does provide otherwise for distributions made
with respect to stock. So using §61(a) as a stopgap would
only sanction yet another eccentricity: §301(a) would be
held not to cover what its text says it “shall” (the class of
distributions made with respect to stock for which no
other more specific provision is made), while §61(a) would
need to be applied to what by its terms it should not be (a
receipt of funds for which tax treatment is “otherwise
14 BOULWARE v. UNITED STATES
Opinion of the Court
provided” in §301(a)).
The implausibility of a statutory reading that either
creates a tax limbo or forces resort to an atextual stopgap
is all the clearer from the Ninth Circuit’s discussion in this
case of its own understanding of the consequences of
Miller’s rule: the court openly acknowledged that “impos
ing an intent requirement creates a disconnect between
civil and criminal liability,” 470 F. 3d, at 934. In constru
ing distribution rules that draw no distinction in terms of
criminal or civil consequences, the disparity of treatment
assumed by the Court of Appeals counts heavily against
its contemporaneous intent construction (quite apart from
the Circuit’s understanding that its interpretation entails
criminal liability for evasion without any showing of a tax
deficiency).
Miller erred in requiring a contemporaneous intent to
treat the receipt of corporate funds as a return of capital,
and the judgment of the Court of Appeals here, relying on
Miller, is likewise erroneous.
IV
The Government has raised nothing that calls for affir
mance in the face of the Court of Appeals’s reliance on
Miller. The United States does not defend differential
treatment of criminal and civil cases, see Brief for United
States 24, and it thus stops short of fully defending the
Ninth Circuit’s treatment. The Government’s argument,
instead, is that we should affirm under the rule that be
fore any distribution may be treated as a return of capital
(or, by a parity of reasoning, a dividend), it must first be
distributed to the shareholder “with respect to . . . stock.”
Id., at 19 (internal quotations omitted). The taxpayer’s
intent, the Government says, may be relevant to this
limiting condition, and Boulware never expressly claimed
any such intent. See ibid. (“[I]ntent is . . . relevant to
whether a payment is a ‘distribution . . . with respect to [a
Cite as: 552 U. S. ____ (2008) 15
Opinion of the Court
corporation’s] stock’ ”); but see Tr. of Oral Arg. 44 (“[J]ust
to be clear, the Government is arguing for an objective test
here”).
The Government is of course correct that “with respect
to . . . stock” is a limiting condition in §301(a). See supra,
at 2–3.12 As the Government variously says, it requires
that “the distribution of property by the corporation be
made to a shareholder because of his ownership of its
stock,” Brief for United States 16; and that “ ‘an amount
paid by a corporation to a shareholder [be] paid to the
shareholder in his capacity as such,’ ” ibid. (quoting 26
CFR §1.301–1(c) (2007) (emphasis deleted)).
This, however, is not the time or place to home in on the
“with respect to . . . stock” condition. Facts with a bearing
on it may range from the distribution of stock ownership13
——————
12 Another limiting condition is that the diversion of funds must be a
“distribution” in the first place (regardless of the “with respect to stock”
limitation), see supra, at 6–8, though the Government is content to
assume that §301(a)’s “distribution” language is capacious enough to
cover the diversions involved here, and that if Boulware bears the
burden of production in going forward with the defense that the funds
he received constituted a “distribution” within the meaning of §301(a),
see n. 14, infra, that burden has been met. Nor does the Government
dispute that Boulware offered sufficient evidence of his basis and HIE’s
lack of earnings and profits. See Brief for United States 34, n. 11.
13 See, e.g., Truesdell v. Commissioner, IRS Non Docketed Service
Advice Review, 1989 WL 1172952 (Mar. 15, 1989) (“We believe a
corporation and its shareholders have a common objective—to earn a
profit for the corporation to pass onto its shareholders. Especially
where the corporation is wholly owned by one shareholder, the corpora
tion becomes the alter ego of the shareholder in his profit making
capacity. . . . [B]y passing corporate funds to himself as shareholder, a
sole shareholder is acting in pursuit of these common objectives”). We
note, however, that although Boulware was not a sole shareholder, the
Tax Court has taken it as “well settled that a distribution of corporate
earnings to shareholders may constitute a dividend,” and so a return of
capital as well, “notwithstanding that it is not in proportion to stock-
holdings.” Dellinger v. Commissioner, 32 T. C. 1178, 1183 (1959); see
ibid. (noting that because other stockholders did not complain when a
16 BOULWARE v. UNITED STATES
Opinion of the Court
to conditions of corporate employment (whether, for exam
ple, a shareholder’s efforts on behalf of a corporation
amount to a good reason to treat a payment of property as
salary). The facts in this case have yet to be raked over
with the stock ownership condition in mind, since Miller
seems to have pretermitted a full consideration of the
defensive proffer, and if consideration is to be given to that
condition now, the canvas of evidence and Boulware’s
proffer should be made by a court familiar with the whole
evidentiary record.14
As a more specific version of its “with respect to . . .
stock” position, the Government says that the diversions of
corporate funds to Boulware were in fact unlawful, see
Brief for United States 34–37; see also n. 5, supra, and it
argues that §§301 and 316(a) are inapplicable to illegal
transfers, see Brief for United States 34–37; see also
D’Agostino, 145 F. 3d, at 73 (“[T]he ‘no earnings and prof
its, no income’ rule would not necessarily apply in a case of
——————
taxpayer received unequal property, “under the circumstances they
must be deemed to have ratified the distribution”); see also Crowley v.
Comissioner, 962 F. 2d 1077 (CA1 1992); Lengsfield v. Commissioner,
241 F. 2d 508 (CA5 1957); Baird v. Commissioner, 25 T. C. 387 (1955);
Thielking v. Commissioner, 53 TCM 746 (1987), ¶87, 227, P–H Memo
TC.
14 Boulware does not dispute that he bears the burden of producing
some evidence to support his return-of-capital theory, including evi
dence that the corporation lacked earnings and profits and that he had
sufficient basis in his stock to cover the distribution. See Tr. of Oral
Arg. 53. He instead argues that, as to the “with respect to . . . stock”
requirement, it suffices to show “[t]hat he is a stockholder, and that he
did not receive this money in any nonstockholder capacity.” Id., at 57.
The Government, for its part, on the authority of Holland v. United
States, 348 U. S. 121 (1954) and Bok, 156 F. 3d, at 163–164, argues that
Boulware must offer more evidence than that. We express no view on
that issue here, just as we decline to consider the more general question
whether the Second Circuit’s rule in Bok, which places on the criminal
defendant the burden to produce evidence in support of a return-of
capital theory, is authorized by Holland and consistent with Sandstrom
v. Montana, 442 U. S. 510 (1979), and related cases.
Cite as: 552 U. S. ____ (2008) 17
Opinion of the Court
unlawful diversion, such as embezzlement, theft, a viola
tion of corporate law, or an attempt to defraud third party
creditors” (emphasis in original)); see also n. 8, supra. The
Government goes so far as to claim that “[t]he only ra
tional basis for the jury’s judgment was a conclusion that
[Boulware] unlawfully diverted the funds.” Brief for
United States 37.
But we decline to take up the question whether an
unlawful diversion may ever be deemed a “distribution . . .
with respect to [a corporation’s] stock,” a question which
was not considered by the Ninth Circuit. We do, however,
reject the Government’s current characterization of the
jury verdict in Boulware’s case. True, the jurors were not
moved by Boulware’s suggestion that the diversions were
corporate advances or loans, or that he was using the
funds for corporate purposes. But the jury was not asked,
and cannot be said to have answered, whether Boulware
breached any fiduciary duty as a controlling shareholder,
unlawfully diverted corporate funds to defraud his wife, or
embezzled HIE’s funds outright.
V
Sections §§301 and 316(a) govern the tax consequences
of constructive distributions made by a corporation to a
shareholder with respect to its stock. A defendant in a
criminal tax case does not need to show a contemporane
ous intent to treat diversions as returns of capital before
relying on those sections to demonstrate no taxes are
owed. The judgment of the Court of Appeals is vacated,
and the case is remanded for further proceedings consis
tent with this opinion.
It is so ordered.