Question

In a criminal tax case, Darth Vader was charged with several counts of tax evasion and filing a false income tax return, stemming from his diversion of funds from Jedi, Inc., a closely held corporation of which he was president, founder, and controlling shareholder. At trial, the U.S. sought to establish that Vader had received taxable income by systematically diverting funds from Jedi to support a lavish lifestyle. Vader gave millions of dollars of Jedi money to his mistress and millions of dollars to his wife, without reporting any of this money on his personal income tax returns. Vader siphoned off money primarily by writing checks to his employees and friends and having them return the cash to him, by diverting payments by Jedi customers, by submitting fraudulent invoices to Jedi and by laundering Jedi money through shell companies in Panama and St. Kitts-Nevis. In his defense, Vader sought to introduce evidence that Jedi had no retained earnings or current earnings or profits in the relevant taxable years. What result under §7201?

Answer 1

Darth's response is not adequate as he has systemically illegitimately manipulated the Jedi's assets to evade taxes. Therefore all those funds in question will be taken into account when measuring Jedi's taxable income.

It can be inferred after that that that the Jedi has some existing gain / retained earnings or not.

When Darth considers himself guilty, he shall be liable for charges of fine, reward and prosecution under sec.7201.