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personal portions of a trip, because petitioner arranged for the
Sley Corporations to pay for only that portion of Baybrook’s trip
to Florida that she spent on business (see supra note 5), not her
entire trip.
Petitioner’s background increases our confidence that he
understood that, when he told Baybrook that Markette was to pay
for the travel and entertainment expenses on the Markette
American Express invoices, it would result in the constructive
dividends’ not being reported on his and Betsy’s joint tax
returns. We believe that petitioner acted in bad faith, with the
intention that the constructive dividends not be reported.
Petitioner points to the relatively small amounts of omitted
constructive dividends, compared to the substantial amounts of
income that he and Betsy reported, and substantial amounts of
income taxes they paid. Compare, for example, table 19 with
tables 13 and 14. The significance of large relative omissions
in most fraud opinions decided for respondent is that the
relative magnitude of the omissions convinced us that the
omissions could not have been inadvertent. In the instant cases,
petitioner’s knowledge of the tax laws combines with the other
elements we discuss to convince us that these omissions could not
have been inadvertent. Thus, in the instant cases, the
comparatively small relative magnitude of omissions does not
point toward inadvertence.
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