William Dark, D/B/A Delmar Race & Sports Club v. United States

William Dark appeals a district court judgment finding him liable for taxes from an illegal gambling operation on his legal gambling premises. He claims that because he is not criminally culpable, he cannot be subject to tax liability. He further alleges that the court’s method of determining the amount of liability is erroneous.

We affirm the district court.

I.

Plaintiff Dark owns and operates the Delmar Race & Sports Club, a bookmaking business licensed by the State of Nevada. Section 4401 of the Internal Revenue Code, 26 U.S.C. § 4401 , required a 10% tax on all wagering operations. Under Nevada law, the tax is to be collected by the bookmaker from the bettor.

In 1967, undercover Internal Revenue Service (“IRS”) agents placed bets with Dark’s employees at the Delmar Club and were not required to pay the excise tax. The employees did not treat these bets in the usual fashion — by stamping them and producing a duplicate for the bettor. The bets received a special code and did not appear in Dark’s bet slips and summary sheets purportedly reflecting all bets and payouts for the period.

Revenue agents subsequently searched the premises pursuant to a warrant and seized the day’s…