The opinion of the court was delivered by: FRANKEL
Plaintiff Clifford Irving, a United States citizen, resides in Ibiza, Spain, with his wife, Edith, also a plaintiff, who is a citizen of Switzerland. Plaintiff Richard Suskind is, like Irving, a United States citizen resident in Ibiza. The genesis of their troubles, extending far beyond this proceeding, is in their roles in what they describe as the "Hughes hoax."
Briefly described, mostly in plaintiffs' terms, the hoax was a plan concocted by the two male plaintiffs to write "a spurious 'authorized' version of the life of the billionaire recluse, Howard Hughes * * *." For this proposed contribution, Irving obtained a contract with the publishing house of McGraw-Hill, Inc. Pursuant to that contract, Irving received from McGraw-Hill in the year 1971 a total of $765,000 -- $100,000 as advance royalties, $15,000 for expenses and $650,000 in checks made out to Howard Hughes for supposedly participating in and authorizing the work. Of the $650,000, $466,250 was deposited following collection of the checks in an account in the Swiss Banking Corporation by plaintiff Edith Irving, "using [in the slightly uncertain account of her counsel requesting a revenue ruling] either assumed names or false identification papers." Other portions of that money, which never found its way to Hughes, were placed in various bank and brokerage accounts, including at least one in the name of Edith Irving.
When events deviated somewhat from their alternatively described "bold plan," plaintiffs were indicted on federal charges of mail fraud and conspiracy to commit mail fraud. Having pled guilty to the conspiracy count, they are scheduled to be sentenced in this court tomorrow. Having also pled guilty to state grand larceny and conspiracy charges, they are to receive their state sentences on the same day.
On February 4, 1972, defendant District Director sent to each of the plaintiffs a letter reporting exercise of the power under 26 U.S.C. § 6851 (a) to "terminate" a taxable year and demand immediate payment of a tax upon a finding "that a taxpayer designs quickly to depart from the United States or to remove his property therefrom, or to conceal himself or his property therein, or to do any other act tending to prejudice or to render wholly or partly ineffectual proceedings to collect the income tax for the current or the preceding taxable year * * *." The letters differ in the amounts they assess but are otherwise substantially identical. The one to Edith Irving, whose claim is almost the exclusive subject of plaintiffs' contentions, reads this way:
"You are hereby notified that I find you design quickly to depart from the United States and to conceal or remove your property from the United States, or to do some other act, thereby tending to prejudice or render ineffectual collection of income tax for the period of January 1 to December 31, 1971.
"Accordingly, under authority of section 6851 of the Internal Revenue Code and regulations, I declare the taxable period of January to December 31, 1971, immediately terminated and the income tax for such period immediately due and payable. Any such tax in the following amount that is unpaid will be immediately assessed against you.
Taxable Period Tax
January 1 to December 31, 1971 $243,118.00
"Demand for immediate payment of the full amount of this tax is hereby made.
"Under section 443 of the Internal Revenue Code you are required to file a return for your terminated taxable period. Such termination and filing does not relieve you of the responsibility for filing a return for your usual annual accounting period under section 6012 of the Code. Any amount collected as a result of termination of the period will be applied against the above assessment and credited against the tax finally determined to be due on your annual return.
sgd Elliott H. ...