- 24 -
petitioners' agreeing that the gross income in their returns for
1987, 1988, and 1989 was understated in the amounts of $10,143,
$55,855, and $69,556, respectively. These amounts are
substantial when compared to the total gross income of $40,548,
$44,081, and $39,860 reported as received from Fruitland during
1987, 1988, and 1989, respectively. There is little doubt that
petitioner knew that his income for each taxable year at issue
exceeded the amount reflected on his return for that year.
Petitioner was the partner responsible for managing the financial
affairs of the partnership. All transactions involving the
partnership checking account, including those transactions
relating to petitioner's personal expenditures, were reflected on
bank statements which petitioner received. Petitioner was also
the partner who purchased and maintained the cashier's checks.
Despite possessing knowledge of this information, petitioner
refrained from sharing it with his accountant. Instead,
petitioner filed the returns as prepared by his accountant. The
frequency and magnitude of the unreported income conceded by
petitioners is probative evidence that supports our finding that
the understatements of income were fraudulent, rather than
inadvertent or accidental. Such a pattern of consistent
underreporting of income is strong evidence of fraud. Otsuki v.
Commissioner, supra at 106-108; Smith v. Commissioner, supra.
This evidence justifies the inference of fraud. See Holland v.
United States, 348 U.S. 121, 137 (1954).
Page: Previous 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NextLast modified: May 25, 2011