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United States v. Shortt Accountancy Corp.
United States Court of Appeals for the Ninth Circuit
785 F.2d 1448 (9th Cir. 1986)
Shortt Accountancy Corporation (Shortt) (defendant) was an accounting firm that prepared tax returns and provided tax-planning services. Ronald Ashida (defendant) was the CEO. Clifford Wilson sought tax-planning advice from Shortt. Ashida offered Wilson an opportunity to invest in a straddle position in securities that would lead to a large tax deduction for Wilson. However, Congress had recently changed a law, disallowing deductions of this type for securities purchased after a certain date. As a result, Ashida advised Wilson that backdating a transaction would be necessary to claim the deduction. Wilson informed the government (plaintiff) of Ashida’s tax scheme. The government enlisted Wilson to engage Shortt in this scheme. Paul Whatley, an employee of Shortt, supervised Wilson’s tax return and attested that it was correct on behalf of Shortt. Ultimately, no backdated documents were used, but certain transactions were structured to appear as if they occurred before the cutoff date set by Congress in order to allow Wilson to claim a deduction from straddle losses. Whatley did not know that the information provided to him by Ashida was false and that the straddle deduction was improper. Shortt and Ashida were indicted for filing false tax returns under 26 U.S.C. § 7206(1) based on the improper straddle deductions. A jury convicted Shortt of preparing false tax returns. Shortt appealed to the United States Court of Appeals for the Ninth Circuit.
Rule of Law
Holding and Reasoning (Duniway, J.)
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