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Salls v. Commissioner, T.C. Memo. 1992-547, affd. without
published opinion 26 F.3d 1120 (11th Cir. 1994).
The intent element of fraud
The parties have stipulated for the years 1980 and 1981
facts similar to those of 1982. These facts show an apparent
pattern of unexplained (at this point in the proceedings) cash
expenditures and deposits by petitioner.
Petitioner makes much of the stipulation that certain cash
amounts possessed by petitioner in 1982 were "reported as income"
on the return of Savage. According to petitioner, these cash
amounts were "earned" by Savage,22 and since the cash was
Savage's income, petitioner had no duty to report it.23
Petitioner concludes that he therefore could not have committed
fraud, and if he did have a duty to report additional income on
22This argument is without evidence in the record other than
the reporting position of Savage on the FYE 1982 return. This
return position is not binding on the Court. "In answering the
question of who earned income, it is our task to consider what
was actually done, rather than simply the declared purpose of the
participants". Shaw v. Commissioner, 59 T.C. 375, 383 (1972).
23Petitioner comes to the erroneous legal conclusion that
amounts reported as income by a corporation, Savage, cannot have
been income to another party, i.e., himself. We will not attempt
to catalog all the situations which contradict such a conclusion
but cite for consideration, Truesdell v. Commissioner, 89 T.C.
1280 (1987) (amounts diverted from taxpayer's corporation and
used for expenses for another business owned by taxpayer were
taxable income to taxpayer); Burke v. Commissioner, T.C. Memo.
1987-434, affd. without published opinion sub nom. New Resources
v. Commissioner, 857 F.2d 1471 (5th Cir. 1988). (taxpayer's use
of corporate funds as capital investment in new corporation,
stock of which was held in his own name, was income to him as a
constructive dividend).
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