United States v. Fern

Ronald Fern (defendant) was an accountant. In April 1974, Fern agreed to provide $125,000 in gifts to the New Testament Baptist Church (church). In April, Fern also paid $50,000 to the church. In December, Brumer agreed to Fern’s suggestion that Brumer contribute $25,000 to the church. In January 1975, Brumer decided not to deduct the charitable contribution on his 1974 taxes, instead asking Fern for his money back. In March, Brumer declined Fern’s suggestion that Brumer take the charitable deduction. In April, Fern gave Brumer a $25,000 check. In 1976, the Internal Revenue Service (IRS) audited Brumer’s 1974 tax return. Fern attended an audit interview with IRS agent Wilson. In response to Wilson’s disallowance of certain Brumer deductions, Fern stated that Brumer found a previously unclaimed deduction. Fern then gave Wilson a copy of Brumer’s canceled church-contribution check. Wilson reflected the contribution on her worksheet, stating that she would accept it as a charitable contribution. However, Wilson’s supervisor asked for further evidence, which turned out to be conflicting. An IRS agent thus asked Fern whether Brumer made a contribution to the church. Fern responded yes, but that Brumer was unsure whether he wanted to deduct it. Fern later told the IRS that Brumer decided not to claim the deduction. In fact, no post-audit Fern-Brumer discussion occurred. Fern was convicted of a felony charge of violating 18 U.S.C. § 1011 for making a materially false statement to the IRS. Fern appealed, arguing that prosecuting him under § 1011 would lead to a patently absurd result. Fern further argued that § 1011 was inapplicable because Congress intended to prosecute false statements to the IRS under Internal Revenue Code (code) § 7207, which was a misdemeanor. Per Fern, the more specific provision (§ 7207) controlled over the more general § 1011. Finally, Fern contended that his statements to Wilson were immaterial because Fern never asserted a Brumer charitable deduction in writing.