Chong-Kak and Sang-Ok Lee - Page 26

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          664.  Certain indicia of fraud help us decide the existence of              
          fraud; the presence of several indicia may be persuasive                    
          circumstantial evidence of fraud.  These "badges of fraud"                  
          include:  (1) The filing of false documents; (2) understatement             
          of income; (3) maintenance of inadequate records; (4) implausible           
          or inconsistent explanations of behavior; (5) concealment of                
          assets; (6) failure to cooperate with tax authorities;                      
          (7) engaging in an illegal activity; (8) attempting to conceal              
          the illegal activity; and (9) dealing in cash.  Bradford v.                 
          Commissioner, 796 F.2d 303, 307-308 (9th Cir. 1986), affg.                  
          T.C. Memo. 1984-601; Petzoldt v. Commissioner, 92 T.C. 661, 700             
               Based on our careful review of the record, we conclude that            
          respondent has clearly and convincingly proven the requisite                
          fraudulent intent in each of petitioners' relevant years.                   
          Petitioners' clear pattern of intentional underreporting of                 
          taxable income, coupled with their two sets of books and lack of            
          recordkeeping, leads to a particularly strong inference of fraud.           
          We also consider it significant that the Lees and Hamalee                   
          (through Mr. Lee) pleaded guilty to State income tax violations.            
          Although this conviction does not, in and of itself, establish a            
          fraudulent intent, we consider the crime evidence of a propensity           

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