Patricia G. McCulley - Page 14

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          supplied by Griffith and that he had no contact with petitioner             
          during the preparation process.  Petitioner testified that her              
          attorneys advised her not to sign the amended return.  Based on             
          the testimony of petitioner, the tax preparers, and Agent Johnson           
          himself, we disagree with respondent's assertion that                       
          petitioner's failure to sign the amended return shows her intent            
          to evade taxes.                                                             
               Finally, in addressing the other so-called badges of fraud,            
          we find that Agent Johnson's own testimony exonerates petitioner.           
          He testified that petitioner never denied receipt of the                    
          embezzled funds, nor did she attempt to conceal the money from              
          the IRS.  She made no false entries on any book or records, she             
          did not backdate or postdate any documents, she did not maintain            
          two sets of books, nor did she claim fictitious deductions.  She            
          did not hide any bank accounts, she did not maintain a safe                 
          deposit box or otherwise hoard any funds, nor did she keep                  
          accounts under false names.  She did not make any false                     
          statements related to the preparation and examination of her 1984           
          and 1985 tax returns, nor in any other way did she hinder the               
          examination of those returns.                                               
               In addition, we had an opportunity to closely observe                  
          petitioner's demeanor at trial.  She answered questions freely              
          and without evasion, and we found her testimony credible.                   
          In light of the foregoing, we find that respondent has not                  
          proven by clear and convincing evidence that petitioner engaged             

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