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paid the full restitution amount and served all of the community
hours required of her. Petitioner's probation was terminated
early, because she completed the terms of her probation in an
exceptional manner.
OPINION
Respondent, pursuant to section 6653(b), determined that
petitioner is liable for additions to tax for fraud and interest
thereon for failing to report embezzled income on her 1984 and
1985 tax returns. Petitioner admits that she embezzled money
from her former employer and that she did not report the income.
She asserts, however, that she did not intend to evade taxes.
Rather, petitioner claims that she did not know that embezzlement
income is taxable. If petitioner prevails, respondent is barred
by the section 6501(a) limitations period from assessing and
collecting any tax and additions thereto from her for the years
in issue.
Respondent argues that petitioner's failure to report the
embezzlement income in 1984 and 1985, her guilty plea under
section 7206(1), combined with withholding bank records from tax
preparers and respondent, and refusing to sign an amended return
reporting the embezzled funds, establishes petitioner's requisite
intent to commit fraud. For the reasons discussed below, we
agree with petitioner.
4(...continued)
possible. We therefore disregard the stipulation as clearly
erroneous.
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