COURT UPHOLDS FAILURE-TO-FILE SENTENCE.

                   NOT RECOMMENDED FOR PUBLICATION

[2] Warren and his wife established a carpet sales and installation business in Louisville, Kentucky, which was incorporated in 1988 as Carpet Floor Coverings, Inc. Warren actually installed carpet; he also performed tasks such as surveying work crews, reviewing customer contracts and ensuring that work crews were properly paid. Warren's wife ran the business end of the operation, which included paying bills, accounting, ordering carpet, and dealing with customer complaints. In 1991, the Warrens formed another corporation under the name, D.A.W. Carpet Service d/b/a Classic Floor Covering, Inc., for which Warren was listed as an employee and his wife was named president. Their jobs in the new corporation were the same as they had been in the previous one, and the business was operated as if it were a sole proprietorship.

[3] Warren did not file federal income tax returns for 1990 through 1993, a fact he does not dispute. Neither does he dispute that he knew he was required to file those returns timely. After learning that he was under criminal investigation, Warren directed his accountant, Benjamin Rau, to prepare and file tax returns for 1990 through 1993. Mr. Rau did so, filing joint tax returns for the Warrens for each of the years in question, listing the Warrens' income from the carpet business on Schedule C to Form 1040 as income from a sole proprietorship.

[4] Warren was eventually indicted on three counts of willful failure to file tax returns for 1991, 1992, and 1993 in violation of 26 U.S.C. section 7203. He pled guilty to Counts Two and Three pursuant to a Rule 11 plea agreement, and the government dismissed Count One, recommending a sentence at the low end of the guideline range. Based upon Warren's own tax returns, the IRS case agent calculated the tax loss to be $28,519, and the presentence investigation report adopted this figure. The district court held two sentencing hearings and took testimony from both Mr. Rau and James Breslin, a CPA who testified on behalf of the defendant. Mr. Rau testified that he had chosen to treat the carpet business as a sole proprietorship for tax purposes, not only because was it permissible, but because it was the way the Warrens ran their business. He also testified that by filing joint tax returns, he minimized the Warrens' tax liability. Mr. Breslin testified that he believed Mr. Rau should have filed corporate returns for the carpet business, but when pressed, acknowledged that the method of reporting the business income chosen by Mr. Rau was not impermissible under the tax code.

[5] The district court adopted the tax loss calculation proposed in the presentence investigation report. Pursuant to U.S.S.G. sections 2T1.1(G), 2T4.1(G), the district court calculated Warren's base offense level to be 12, and deducted two points for acceptance of responsibility; the resulting total offense level of 10 and his criminal history category III placed him in a guideline range of 10 to 16 months. The district court sentenced Warren to eight months imprisonment as to each of Counts Two and Three, to be served concurrently, and a two-month period of home detention, followed by a one-year term of supervised release.

[6] On appeal, Warren does not dispute the accuracy of the tax loss figure based on his chosen method of filing his tax returns. ¹ Rather, Warren argues that the tax loss should have been based on his own individual income, not his and his wife's joint income, and that the district court was clearly erroneous in relying on the income listed in Warren's joint tax returns to calculate the loss. Warren claims that although he did in fact report an income creating a tax loss of over $28,000, he should have filed corporate tax returns for the business for each of the years in question; further, Warren claims, the corporation was actually his wife's, not his, and nearly all of the income from it was his wife's income, and not his. Because he could have filed a separate return in each of those years, Warren argues that the tax loss from his failure to file tax returns cannot exceed the amount of tax he would have owed had he in fact filed separately.

[7] We review for clear error the district court's findings of fact, see United States v. Carr, 5 F.3d 986, 993 (6th Cir. 1993), and give "due deference to the district court's application of the guidelines to the facts," United States v. Peters, 15 F.3d 540, 546 (6th Cir. 1994). We recognize that a defendant must carry the heavy burden of persuading this Court that the district court's calculation of loss not only was inaccurate, but was "outside the realm of permissible computations." United States v. Jackson, 25 F.3d 327, 330 (6th Cir. 1994) (citing U.S.S.G. section 2F1.1, comment, (n. 8) ²) (a sentencing court "need only make a reasonable estimate of the range of loss, given the available information").

[8] Although we have found no case law directly on point in the criminal context, our decision is informed by some analogous civil decisions. In Fowler v. United States, 352 F.2d 100 (8th Cir. 1965), the appellants were convicted of tax evasion and, in their defense, argued that they could have taken greater depreciation on certain assets had the useful life of the assets been calculated under a different method at the time of filing. The Eighth Circuit held:

     Appellants evaded their taxes years ago and they cannot, some

[9] The testimony at the sentencing hearing established that the Warrens operated the business as if it were a sole proprietorship, that their accountant chose to prepare -- and the Warrens chose to file -- joint tax returns that treated the income from the business as income from a sole proprietorship because that treatment reflected the realities of the business's operation and minimized the tax due, and that it was legally permissible for the Warrens to report and to pay tax on the income in that manner. Under these circumstances, the IRS would not have been free to calculate the tax in some other manner, simply because another method of accounting or calculation would have resulted in an increased amount of tax due. And under these circumstances, it was reasonable for the district court to conclude that the loss due to Carl Warren's failure to file tax returns for the years in question was the amount of the tax reflected on the returns that he eventually did file.

[10] Accordingly, we AFFIRM Warren's sentence.

² Renumbered as U.S.S.G. section 2F1.1, comment, (n. 9) by Amendment 587. See U.S. Sentencing Comm'n Guidelines Manual, Appendix C (11/1/98).