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Nicola v. United States

August 9, 1934


Appeal from the District Court of the United States for the Western District of Pennsylvania; Frederic P. Schoonmaker, Judge.

Author: Davis

Before WOOLLEY, DAVIS and THOMPSON, Circuit Judges.

DAVIS, Circuit Judge.

This is an appeal from a judgment of conviction entered upon the verdict of a jury.

F. F. Nicola, hereinafter called defendant, was indicted, tried, and convicted for attempting to defeat and evade a part, $26,394.20, of his income tax for the year 1928, in violation of section 146 (b) of the Revenue Act of that year (26 USCA ยง 2146 (b) which provides that:

"(b) Any person required under this title to collect, account for, and pay over any tax imposed by this title, who willfully fails to collect or truthfully account for and pay over such tax, and any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof, shall in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, be fined not more than $10,000, or imprisoned for not more than five years, or both, together with the costs of prosecution."

While the evidence was complicated and technical and consisted almost entirely of voluminous books of account interpreted by expert opinions, the issue itself was comparatively simple.

The Miller Printing Machinery Company, hereinafter called the Miller Company, a corporation mostly owned and controlled by the defendant, sold certain patents and other personal property in 1928 to Brandtjen & Kluge, Inc., for $675,000 in cash on which there was a sales commission of 15 per cent. or $101,250. This commission was credited by the Miller Company on the day the sale was completed to the Point Improvement Company, hereinafter called the Point Company, a corporation of which the defendant was president, as income to it and was so returned by the Point Company. The contention of the government is that this commission was really the income of the defendant which he did not return and on which he did not pay the tax as personal income to himself, though it was paid by the Point Company, at the rate applicable to it, to the government and is still retained by it.

The inducement, according to the government, to have the return made by the corporation rather than the defendant was to secure a lower tax rate.If this contention is true, the defendant would thus save the difference between the highter and lower rate.

There was no real contradiction between the evidence of the government and defendant. The government relied mainly upon entries in the books of account interpreted in the light of a certain typewritten letter, Government Exhibit No. 15. The defendant contends that these entries, when properly interpreted, show that this commission was income of the Point Company and not of himself.

The defendant contends that the judgment should be reversed and a new trial granted for several reasons:

I. Because prejudicial error was committed in the admission of evidence.

1. The first specification relates to the admission of the following typewritten letter:

"Mr. Girts: Herewith find a number of salesmen's items that I have taken over from the Miller P.M. CO. on which the collections are expected to be made and credited to me.

"Report to me on this the 15th of every month. I have not entered these on my books although I may do so in conneciton with taxes if we can declare a loss without bringing suit.

"It is very important that I have directly and I know this will take a great deal of time and overtime a study of what shift is necessary for me to put on the various books in connection with profits and losses for 1928. As we understand it, there is a heavier tax on the individual than on the corporation and therefore I want to pass as many of these profits through land companies like the Point Improvement Company, Nicola Bros. Co., or Nicola Land Co. as I can. Make a careful survey of all of this year's transactions. I anticipate in view of having sold 240 shares of Chase National Bank that I will have a very large amount to account for there.

"Let me know what each one of the companies seem to have in overhead burden that would be an offset to possible profits that might be swung to them.

"F. F. Nicola."

This letter was found and secretly copied by Henry A. Wolf, a government agent who examined the books. It was pinned to a voucher relating to the account of a number of salesmen, which had been taken over from the corporation by the defendant. It was not only typewritten, but the name "F. F. Nicola" which it bore was also in typewriting. There was no evidence establishing who wrote it, who pinned it to the voucher, or who left it in the book. It was entirely unidentified and unproved. Was it admissible against the defendant?

"The generally accepted rule is to the effect that the mere fact that a letter (other than a reply letter) purports to have been written and signed by the person in question is insufficient to establish its authenticity and genuineness. * * * This rule is especially applicable where the letter is typewritten or printed and the signature is ...

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