"Adult entertainer" thought she could avoid reporting "gifts".
"At trial, Fxxx explained that in addition to the money that she earned dancing on stage, she also made money off stage in private rooms at the exotic dancing clubs or off the premises."
"...for money for constructing her home, paying bills, getting breast implants, and paying college tuition... She considered it all a gift. Fxxxx testified that she thanked (folks) for the money gifted her by giving him free private dances."
She was convicted on 4 counts since under-reported income for 4 tax years in U.S. District Court. Sentenced to 33 months on each count but concurrently.
Appealed to the 8th Circuit
"On appeal, Fxxxx argues that (1) insufficient evidence exists to support the jury's finding that Fxxxx knowingly and willfully underreported her income; (2) the district court abused its discretion in failing to instruct the jury that it was required to unanimously agree on which source of income that Fxxxx failed to report on her income tax return; and (3) the district court improperly calculated Fxxx's Guidelines range and imposed a substantively unreasonable sentence."
The jury convicted based on unreported income from individuals, payments for parties and unreported tips at a strip club.
"Fairchild argues that her 33-month sentence is procedurally and substantively unreasonable. First, she asserts that the district court's calculation of the Guidelines range was based on an erroneous calculation of the tax-loss amount and an erroneous finding that Fxxxxx failed to report income from criminal activity. Second, she maintains that her 33-month sentence is substantively unreasonable for failing to account for the effects of past sexual abuse and her status as the sole parent to three young children."
The Defendant's own testimony during the trial indicated that she received tips during the time period in question in cash. She admitted that was not reported as income on her income tax returns, and she stated that was just an oversight."
The Defendant also objected to the sentence enhancement since the unreported income was over $10,000 a year from illegal income - prostitution.
In a 26 page decision filed 3/17/2016 the 8th Circuit rejected all of her arguments and upheld the 33-month prison term.
And of course she would have to pay back taxes with large penalties for failure to report.
Source: United States Court of Appeals
For the Eighth Circuit No. 14-3517
Dave notes this reminds me of a fight I had with the IRS decades ago when I was a Tax Supervisor for a then "Big 8" CPA firm. Someone suspected of underreporting income was hit with a $1 million IRS Jeopardy assessment that was a lien on all bank accounts and assets and was outrageous. It took a long time to convince the IRS there was no unreported income and get the lien released.