Bill McDonald - Page 28

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          concessions by petitioners, there can be no doubt that there was            
          an underpayment of tax in each petitioner’s 1989 tax year.  Thus,           
          we must decide for each petitioner whether any portion of such              
          underpayment was due to fraud.  Id.                                         
               Fraudulent intent is seldom proven by direct evidence;                 
          hence, the courts have relied on certain indirect evidence in               
          determining whether or not fraudulent intent existed.  These                
          "badges of fraud" include:  (1) Understating income; (2) keeping            
          inadequate records; (3) failing to file tax returns; (4)                    
          providing implausible or inconsistent explanations of behavior;             
          (5) concealing assets; and (6) failing to cooperate with tax                
          authorities.  Bradford v. Commissioner, 796 F.2d at 307.                    
               Respondent contends that in these consolidated cases all of            
          the above-referenced badges of fraud exist, except that                     
          petitioners did not fail to file returns.  Petitioners contend              
          that respondent has not shown fraud by clear and convincing                 
          evidence and that Maynard “believed that he was entitled to a               
          large net operating loss carryforward which would alleviate any             
          income tax liability and that he would not be able to utilize the           
          balance of the loss carryforward within the statutory time.”  We            
          find petitioners’ explanation to be disingenuous considering that           
          they are tax professionals.  We find that respondent has shown              
          that each petitioner’s underpayment of tax for 1989 was due to              
          fraud within the meaning of section 6663.  We also find that                
          petitioners have not shown that any part of the underpayments was           
          not due to fraud.                                                           

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