Ted W. Gleave - Page 50

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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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