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gasoline in its fiscal 1981 and its fiscal 1982 are significant
evidence of its fraudulent intent with regard to its income taxes
for these years. Bradford v. Commissioner, 796 F.2d at 308;
Petzoldt v. Commissioner, 92 T.C. at 701-702; McGee v.
Commissioner, 61 T.C. at 260.
(b) Substantial Omissions
Kenmore reported taxable income in the amount of $1,755 for
its fiscal 1981 and $23,821 for its fiscal 1982. Supra table 1.
Kenmore failed to report taxable income in the amount of
$511,669.28 for its fiscal 1981 and $345,556.67 for its fiscal
1982 (supra tables 3 and 4), which amounts to more than 99
percent of Kenmore’s fiscal 1981 taxable income and more than 94
percent of its fiscal 1982 taxable income. Supra table 7. These
omissions are not the result of any good-faith dispute as to
taxability. See infra (d) Implausible Explanations.
The mere failure to report income is not sufficient to
establish fraud. Petzoldt v. Commissioner, 92 T.C. at 700.
However, exceedingly large discrepancies between the taxpayer’s
actual net income and the net income reported do constitute
evidence of fraud when such discrepancies are not adequately
explained. Stone v. Commissioner, 56 T.C. at 224. Kenmore’s
substantial omissions of taxable income for its fiscal 1981 and
its fiscal 1982 are substantial evidence of fraud as to these 2
years.
(c) Inadequate Records
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