-14-
failed to report $195,489 of income; forging the Lopps'
signatures on four income tax refund checks; delivering U.S.
obligations bearing forged endorsements; and uttering, passing,
and publishing of U.S. obligations regarding the forged refund
checks.
A taxpayer who has been convicted of willfully and knowingly
subscribing to a false income tax return under section 7206(1) is
not collaterally estopped from contesting that he or she is
liable for the addition to tax for fraud because a conviction
under section 7206(1) does not require a showing that the
taxpayer willfully attempted to evade tax. Wright v.
Commissioner, 84 T.C. 636, 643 (1985); Goodwin v. Commissioner,
73 T.C. 215, 235-239, 241-244 (1979). However, we may consider a
conviction under section 7206(1) in deciding whether a taxpayer
is liable for fraud. Wright v. Commissioner, supra at 643-644.
Engaging in illegal activities, such as filing a false return and
committing forgery, is a badge of fraud. Bradford v.
Commissioner, supra.
b. Understatement of Income
As discussed above at paragraph II-B-1, petitioner is
collaterally estopped by his conviction under section 7206(1)
from denying that he failed to report a substantial amount of
income in 1984. This is a badge of fraud. Id. at 307.
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