- 11 - proof of the taxpayer's intent is rarely available. The taxpayer's entire course of conduct may establish the requisite fraudulent intent. Stone v. Commissioner, 56 T.C. 213, 223-224 (1971); Otsuki v. Commissioner, 53 T.C. 96, 105-106 (1969). A pattern of consistent underreporting of income for a number of years, when accompanied by other circumstances showing an intent to conceal, justifies the inference of fraud as to each of the years. Holland v. Commissioner, 348 U.S. 121, 137 (1954); Otsuki v. Commissioner, supra. Under section 61, gross income includes "all income from whatever source derived." Gross income includes funds derived from legal and illegal sources. Rutkin v. United States, 343 U.S. 130 (1952). Where a taxpayer keeps no books and records, or the taxpayer fails to file a return from which his income tax liability can be assessed, the IRS may reconstruct the taxpayer's income. Sec. 446(b); Moore v. Commissioner, 722 F.2d 193 (5th Cir. 1984), affg. T.C. Memo. 1983-20. The IRS has great latitude in reconstruction methods. Giddio v. Commissioner, 54 T.C. 1530, 1532-1534 (1970). As a general rule, the computation of taxable income is made under the method of accounting regularly employed by the taxpayer or, if no method of accounting has been used by the taxpayer, made under such method as, in the opinion of respondent, clearly reflects income. Sec. 446(b); Moore v. Commissioner, supra; Giddio v. Commissioner, supra. This Court has approved the use of "trick sheets" to reconstruct aPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
Last modified: May 25, 2011