Charles E. Campbell - Page 17

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            maintain records of his business activities or produce any                                   
            records to respondent during the examination.  We agree with                                 
            respondent.  Respondent, through the deemed admissions, has                                  
            affirmatively shown various indicia of fraud committed by                                    
            petitioner.  First, petitioner's understatement of income in 1987                            
            through 1989 indicates fraud.  Through the deemed admitted facts,                            
            respondent has established that over a 3-year period petitioner                              
            engaged in a pattern of concealing substantial amounts of income.                            
            Petitioner received substantial income from his involvement in                               
            gambling activities, the sale of illegal narcotics, and the sale                             
            and repair of used cars.  Petitioner has admitted that he and                                
            Ms. Campbell had unreported gross income in the amounts of                                   
            $126,846, $108,438, and $47,969 for 1987 through 1989,                                       
            respectively.  This is strong evidence of an intent to evade tax.                            
            Merritt v. Commissioner, 301 F.2d 484, 487 (5th Cir. 1962), affg.                            
            T.C. Memo. 1959-172.                                                                         
                  Second, failure to maintain adequate books and records and                             
            failure to produce business records during the examination                                   
            process are evidence of fraud.  The deemed admissions in                                     
            pertinent part establish that petitioner                                                     
                  failed to maintain complete and adequate records of the                                
                  activities [he] conducted in cash during the taxable                                   
                  years 1987, 1988, and 1989 * * * [and that petitioner]                                 
                  failed to produce any records of [his] business or                                     
                  personal activities for respondent during the                                          
                  examination of [petitioner's] income tax liabilities                                   
                  for the taxable years 1987, 1988, and 1989.                                            





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