Guilty Verdict

If you could go back in time, it likely wouldn’t be during the late 1920s and 1930s.

Unemployment in the United States had reached an all-time high, with one out of every three individuals unemployed. The decade was marked by a global economic and political crises that culminated in World War II. The international financial system collapsed beginning with the 1929 Wall Street Catastrophe, the greatest stock market catastrophe in American history.

Meanwhile, Al Capone, a.k.a. Scarface and Public Enemy Number One, was known for a long list of crimes ranging from bootlegging to murder. He became one of the most well-known and violent gangsters in America.

Al Capone prison cell

They Had a Plan

During this time, the feds were quietly assembling a case against Capone. Despite his famous and lavish lifestyle, Capone never filed a federal income tax return, claiming that he had no taxable income. The Internal Revenue Service’s Special Agent Frank Wilson and the “T-Men” went after the money, gathering evidence that Capone had made millions of dollars in untaxed earnings.

On May 16, 1927, the United States Supreme Court ruled in United States v. Sullivan that “[g]ains from unlawful liquor trafficking are subject to the income tax would be taxable” (274 U.S. 259). For a long time, the feds have been anticipating this ruling. All they needed now was a way to apprehend him.

After prosecutors uncovered evidence that Capone had been gambling at the racetrack, he was jailed on contempt charges in 1930. He was released on bond but was later re-arrested on weapons charges and imprisoned at Philadelphia’s Eastern State Penitentiary, where he was said to live in luxury with French furniture, plush rugs, and a Victrola radio in his cell.

The Moral of the Story

Capone was found guilty and indicted on 22 counts of federal income tax evasion on October 17, 1931. A week later, on October 24, Capone was sentenced to an astounding 11 years in prison. He was fined $50,000 ($798,055 in today’s money), plus court costs and $215,000 ($3,431,640 in today’s money) in unpaid taxes.

There’s obviously a lot more to this fascinating topic, and you can learn more about it by reading sites like Mighty Taxes or listening to some excellent podcasts.

However, there’s a moral to the story. The IRS has the legal right and capacity to levy (take away) property, garnish wages and impose liens on property. You could also end up in prison if you enjoy pushing the boundaries. Make sure you pay your taxes!

We provide an excellent financial wellness resource to our clients as a complementary service that can assist you in answering queries concerning tax responsibilities. To discover more about how to sign up, go to the link below.

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