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evidence. See Cheek v. United States, 498 U.S. 192, 202 (1991);
see also Niedringhaus v. Commissioner, 99 T.C. 202, 217 (1992).
Respondent has failed to carry the burden of proof. Mrs.
Dykstra is not a savvy taxpayer or a sophisticated businesswoman.
She admittedly stole money and initially concealed her theft from
her employer. Mrs. Dykstra's defrauding of her employer,
however, does not automatically lead to the conclusion that she
intended to defraud the Federal Government.
There is no evidence that Mrs. Dykstra withheld information
from or attempted to mislead respondent during his investigation.
In fact, it appears that once Mrs. Dykstra was informed that
embezzled funds were taxable, she fully admitted to owing the
tax. She did not maintain two sets of books or attempt to
conceal assets. At trial, she answered questions freely,
honestly, and without evasion. Mrs. Dykstra testified that she
did not know that embezzled income was taxable, and we found her
testimony credible.
While it may be reasonable to conclude that an embezzler is
a type of individual who would understate her income on her
return to avoid paying taxes, we are unable to find on the record
before us any clear and convincing evidence that Mrs. Dykstra
refrained from reporting income which she knew to be taxable.
We, therefore, conclude that Mrs. Dykstra is not liable for the
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