member of the committee and as an American citizen, I did not like the tie-in of the President of the United States with gamblers.

Mr. FOLSOM. I tried to

Mr. LATTA. I did not like it.

Mr. FOLSOM. I tried to preface my remark that it was not intended to bear any implication in this case.

Mr. LATTA. In this respect, has this President been more or less insulated from these agents than prior Presidents?

Mr. FOLSOM. I have no idea.

Mr. LATTA. How long were you there?

Mr. FOLSOM. I have been in the Tax Division for 24 years.

Mr. LATTA. How did you know that this President was insulated and other Presidents were not insulated?

Mr. FOLSOM. I have read the Joint Committee report, sir.

Mr. LATTA. That is what you were basing your professional knowledge on, that report, rather than your own experience?

Mr. FOLSOM. That and the information we saw in the Internal Revenue Service file of the Intelligence Division.

Mr. LATTA. Since you were basing your professional opinion in this case on that Joint Committee report, are there other instances on which you were giving this committee professional opinions that you based your opinion on that report rather than on your experience?

Mr. FOLSOM. I was concluding that this taxpayer was treated differently, on the basis of what I understood, from the ordinary taxpayer, who is the subject of a fraud investigation.

Mr. LATTA. That is not my question, Mr. Folsom.

Mr. FOLSOM. Then I do not understand your question. If you are asking me if other Presidents have come within the ambit of my experience, they have not.

Mr. LATTA. I will rephrase the question.

Since you indicated that you are here as an expert witness before this committee, you said in answer to my question concerning the insulation of the President that you were basing it on the information contained in this joint study. Is that correct?

Mr. FOLSOM. Yes, sir.

Mr. LATTA. My question, then, was what other, if any, testimony that you have given here as a professional witness have you based on this testimony or this book rather than on your own knowledge, if any?

Mr. FOLSOM. I would answer the Congressman saying that I applied my knowledge and experience to what I found in this book and in the research done by your staff.

Mr. LATTA. When did you leave the Internal Revenue Service?

Mr. FOLSOM. I have never been in the Internal Revenue Service. I am an attorney from the Tax Division of the Justice Department and retired in 1972, in December. I am a consultant still for the Department of Justice.

Mr. LATTA. I would suggest, Mr. Chairman, if we are going to get into any further conversations on this, that we get Commissioner Alexander before this committee to give the testimony for the Internal Revenue Service.

That is all I have to say.

The CHAIRMAN. The time of the gentleman has expired. Mr. Thorn

ton.

Mr. THORNTON. Thank you, Mr. Chairman.

Mr. Folsom, the questions just raised by Mr. Latta seem to me to go to the statement or characterization of your testimony that the President did receive different treatment from the ordinary taxpayer and raises then perhaps a couple of subordinate questions. Why did he receive a different treatment? Based upon your statement, and further, if as hypothesized by Mr. Latta, perhaps other Presidents may have also been accorded a different treatment, would knowledge of that different treatment accorded by the IRS go to the question of mens rea as to when he might expect to receive a different treatment in tax from what the ordinary citizen would receive?

Mr. FOLSOM. I think one would have to be extremely careful to draw an inference from the man's high office that he knowingly hides behind that high office to slide over accurate tax reporting. We are not here making jury speeches, so I would not care to make the statement to this committee that that is an inference that I would draw on the basis of the record I have before me.

However, it certainly is a fact to which I can ascribe as a Government employee of long standing that everyone in the executive branch stands in awe of the highest Executive in our land, and that speaks for itself.

Do I answer your question?

Mr. THORNTON. Thank you. To your knowledge, has there ever been an IRS audit of any President?

Mr. FOLSOM. I could not answer the question. I do not know.

Mr. THORNTON. Thank you. I yield back the balance of my time. The CHAIRMAN. For the purposes of clarification only, Mr. Dennis. Mr. DENNIS. Thank you, Mr. Chairman.

Mr. Folsom, does the offense defined in section 7206 (2) require any knowledge, consent, or participation by the taxpayer himself?

Mr. FOLSOM. The statute expressly said with or without the knowledge of the taxpayer.

Mr. DENNIS. So the answer to that question is "No."

Mr. FOLSOM. No; that is correct.

Mr. DENNIS. Under the language of section 6653 (a) can the 5-percent penalty therein provided for be properly assessed where there is an intent to defraud? Or to put it another way, under the language of that section, can the 5-percent penalty therein provided for—it can be assessed only when there is no intent to defraud, is that not correct? Mr. FOLSOM. That is the way I would read the statute, yes. Mr. DENNIS. That is the way I read it, too. Thank you, sir.

The CHAIRMAN. Mr. Mezvinsky.

Mr. MEZVINSKY. Thank you, Mr. Chairman.

Just as a quick followup on that point, Mr. Folsom, it is true that if evidence is provided that would indicate fraud, that would not, simply by the negligence payment of 5 percent, that would not close out the option of a fraud action by the Tax Division, am I right on that?

Mr. FOLSOM. That is correct. A grand jury could indict regardless of what the administrative agency determined.

Mr. DENNIS. Would the gentleman from Iowa yield one moment? Mr. MEZVINSKY. I only have 5 minutes.

Mr. DENNIS. Well, I want to give you 4 of them.

Mr. MEZVINSKY. Can I finish my time and if my time

Mr. DENNIS. Oh, never mind.

Mr. MEZVINSKY. The second point is we know when you discussed criteria that you were discussing the background as to any other ordinary taxpayer. Would you care to point out-in this case, we have a taxpayer who is a lawyer. He has made public testimony that he has practiced considerable tax law. Is there any distinction between a lawyer and a nonlawyer regarding the use of a preparer of a tax return?

Mr. FOLSOM. The tax cases would warn us to be extremely careful in drawing excessive inferences against lawyers absent proof that they had highly specialized knowledge in the field in which we are talking. Now, I do not know whether that answers your question or not.

Mr. MEZVINSKY. Well, do you take into account the background of a taxpayer?

Mr. FOLSOM. Yes, yes, it certainly is a circumstance that has to be taken into account.

Mr. MEZVINSKY. Now, the last question would be, as I understand your initial comment this morning regarding the criteria of any ordinary taxpayer, am I correct, then, in assuming that if a taxpayer does not answer questions and is under the set of circumstances that you have described here on behalf of our situation, that the burden would then shift to the taxpayer regarding the question of fraud; namely, that if the interrogatory-if the taxpayer does not come forth and answer the matters that were presented, or is not interviewed or is not seen, then in fact the burden would shift regarding any matter that could possibly be recommended to a grand jury? That follows the burden question that Mr. Sarbanes had.

I thought you went into that at the closing part of your initial presentation and I just wanted a clarification of that.

Mr. FOLSOM. I would have to say that administratively, in considering whether a case should be referred for prosecution, certainly the failure of the taxpayer to respond, without putting, putting aside any claim of the fifth amendment-if he claims the fifth amendment, no inference can be raised. If he is given an opportunity to answer questions and declines to do so, the area is left open for inferences to be drawn and the prosecutor would tend to draw unfavorable inferences.

Mr. MEZVINSKY. I will be glad my time is up, Mr. Chairman. I have no further questions.

The CHAIRMAN. Did you yield?

Mr. MEZVINSKY. I have used up my time, Mr. Chairman.

The CHAIRMAN. Ms. Holtzman.

Ms. HOLTZMAN. Thank you, Mr. Chairman.

Just to clarify a question I had asked earlier regarding the inconsistency on the President's tax returns respecting San Clemente, which was treated in one instance as a nonbusiness property for the purposes of the sale of the New York apartment, and then secondly, on the same return was treated as a business property for the purposes of a 25

percent deduction-this is on the 1969 tax return-I would like to ask Mr. Folsom, from your experience, what inferences do you draw from an explicit inconsistency on the face of a return of this nature? Mr. FOLSOM. Well, it is the nature of prosecutors to draw unfavorable inferences from such inconsistencies. Given some further understatement of tax and income, we would tend to argue that, in the face of the return that was inconsistent or improper, was a guide to the taxpayer's state of mind.

Ms. HOLTZMAN. Thank you.

The CHAIRMAN. Mr. Brooks.

Mr. BROOKS. Mr. Chairman, thank you.

Mr. Folsom, I had one question for you, sir. If the preparers of the income tax are convicted for tax fraud, would this be sufficient to suspend the statute of limitations on the President's 1969 return? Mr. FOLSOM. Not absent proof that the President was implicated. Mr. BROOKS. No further questions, Mr. Chairman.

The CHAIRMAN. That concludes the list of individuals who wanted to ask questions.

Mr. Donohue did not ask any questions, so we will recognize Mr. Donohue.

Mr. DONOHUE. I would like to get this clear in my mind. You say the law as it pertains to gifts to the Government is set forth in section 170(a) (1) of the code.

Mr. McKEITHEN. That is correct. Section 170 in general deals with charitable contributions, yes, sir.

Mr. DONOHUE. Now, section 170-1 (b) contains the following language, does it not: "Ordinarily, a contribution is made at the time. delivery is effected."

Mr. McKEITHEN. What was the number of the section to which you were referring?

Mr. DONOHUE. Section 170-1(b).

Mr. McKEITHEN. You must be referring to the regulations, is that right, sir, not the code?

Mr. DONOHUE. I am referring to tab 2 under the subsection, "Law." Mr. McKEITHEN. Yes, sir.

Mr. DONOHUE. Now, what interpretation should we give, then, that the minute the papers of President Nixon were delivered to Archives with the intent to make a gift to the Government, that constituted a gift to the United States? Or is there something in the law that is required for them to go a step further such as to execute a deed or to execute some legal instrument indicating the transfer of title?

Mr. McKEITHEN. The cases dealing with the subject of gifts generally say that three items must be present: intent of the donor; delivery in this case; and notice to the donee ordinarily. I think since a larger bulk of papers was delivered to the Archives than was covered by the deed

Mr. DONOHUE. Let me interrupt you there.

Mr. MCKEITHEN. Yes, sir.

Mr. DONOHUE. Where in the law does it say that a deed be executed?

Mr. McKEITHEN. The law itself for the purposes of giving a gift does not require a deed as such for income tax purposes. Is that your question?

Mr. DONOHUE. Yes.

Mr. McKEITHEN. A deed is one of the evidences of intent, let us say.

Mr. DONOHUE. But there is nothing in the code or no regulation on the part of GSA that a deed shall be given as evidence of the transfer of title?

Mr. McKEITHEN. In the GSA regulations regarding Presidential libraries, a deed transferring title is suggested.

Mr. DONOHUE. Is it required?

Mr. McKEITHEN. It is not required.

The CHAIRMAN. That concludes this morning's presentation and we will recess until 2 o'clock.

Would you please return the documents that were included in that report?

[Whereupon, at 12:30 p.m., the committee recessed to reconvene at 2 p.m. this same day in secret session.]

[The remaining portion of the June 21, transcript is classified and not reprinted here.]