Mr. Burke engaged in a scheme to divert funds for his own benefit. We
reject his claims that the funds, which he should have paid to U.S. Life, were
either loans or embezzlements by his employees. Respondent's determination of
Mr. Burke's gross receipts for the years in issue is actually less than the
total amount of premiums that was owed to U.S. Life as of March 1987.
Respondent has clearly demonstrated that Mr. Burke failed to report income and
erroneously claimed deductions for embezzlement losses. Consequently,
respondent has clearly proven the underpayment of income tax for the taxable
years in issue.
Next, respondent must show that Mr. Burke intended to evade taxes known
to be owing by conduct that was designed to conceal, mislead, or otherwise
prevent the collection of such taxes. Stoltzfus v. United States, 398 F.2d
1002, 1004 (3d Cir. 1968); Webb v. Commissioner, 394 F.2d 366, 377-378 (5th
Cir. 1968), affg. T.C. Memo. 1966-81; Rowlee v. Commissioner, 80 T.C. 1111,
1123 (1983). The existence of fraud is a question of fact to be resolved upon
consideration of the entire record. Gajewski v. Commissioner, 67 T.C. 181,
199 (1976), affd. without published opinion 578 F.2d 1383 (8th Cir. 1978).
Fraud is never imputed or presumed. Instead, it must be affirmatively
established by respondent with clear and convincing evidence. Beaver v.
Commissioner, 55 T.C. 85, 92 (1970). However, since direct evidence of a
taxpayer's intent is rarely available, fraud may be proven with circumstantial
evidence and reasonable inferences which are drawn from established facts.
Spies v. United States, 317 U.S. 492, 500 (1943); Rowlee v. Commissioner,
supra.
Factors which are indicative of fraudulent intent on the part of a
taxpayer include: (1) Understatements of income; (2) inadequate records; (3)
failure to file tax returns; (4) implausible or inconsistent explanations of
behavior; (5) concealment of assets; (6) failure to cooperate with tax
authorities; (7) engaging in illegal activities; (8) attempting to conceal
these activities; and (9) dealing in cash. Bradford v. Commissioner, 796 F.2d
Page: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 NextLast modified: May 25, 2011