As to “willfulness,” remember that it’s a state of mind (“a voluntary, intentional violation of a known legal duty”). Even if a particular deduction doesn’t pan out for you, even if you’re left with a tax deficiency, there’s still something important that you can do with your belief that you were entitled to the deduction: submit it to the jury to negate your alleged “willfulness.” Obviously, your belief that you weren’t acting wrongly has to be legitimate and can’t be contrary to anything that’s clear beyond doubt, but, as you’ve seen by now, much in the Internal Revenue Code isn’t so clear, and that’s a fertile field for defense.
And that’s not all you can do about “willfulness.” There’s a great deal more that bears on it: your reputation, your physical and emotional stamina , your past tax compliance, etc. And there’s a great deal more to say about this core element in any fraud/evasion case the government tries to bring, as we’ll see in the following chapters. But meanwhile, remember what I said earlier in this chapter about fraud and evasion.
Section 6653(b) of the Internal Revenue Code imposes substantial civil penalties for underpayment of tax if there’s “fraud.”
Section 720 1 of the Code imposes criminal penalties on [ any] person who “willfully attempts in any manner to evade or defeat any tax.” Neither of these key concepts “fraud” or “evasion” are anywhere defined in, the Internal Revenue Code, yet the law considers them the same: in practice, civil fraud amounts to criminal evasion, and vice versa.
Now consider the following case. More
