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The failure to file tax returns, without more, is not
conclusive proof of fraud; such omission may be consistent with a
state of mind other than the intention and expectation of
defeating the payment of taxes. Stoltzfus v. United States,
supra; Cirillo v. Commissioner, 314 F.2d 478, 482 (3d Cir. 1963),
affg. in part and revg. in part T.C. Memo. 1961-192; Kotmair v.
Commissioner, 86 T.C. 1253 (1986). Failure to file, however, may
be considered in connection with other facts in determining
whether an underpayment of tax is due to fraud.
Citing Niedringhaus v. Commissioner, 99 T.C. 202, 211
(1992), respondent relies here on various indicia of fraud in
addition to failure to file tax returns, including understatement
of income, inadequate records, implausible or inconsistent
explanations of behavior, concealment of assets, and failure to
make estimated tax payments. In this case, however, all of those
factors depend on the validity of petitioner's contention that
the distributions from the corporation for his benefit were
repayments of loans and on his alleged good-faith belief that he,
therefore, did not have any taxable income and was not required
to file returns. For various reasons, we conclude that
petitioner's explanations with respect to the purported loans are
so implausible that we are convinced that his failure to file
returns and report the income reflected in the distributions from
the corporation for his benefit was due to fraud.
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