Richard and Brenda Nelon - Page 10

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               Respondent contends that the following facts, taken as a               
          whole, prove that petitioner had the intent to fraudulently evade           
          paying income tax on at least some part of the underpayment for             
          the years in issue:  (1) His failure to file income tax returns             
          for the years 1986 through 1991; (2) through that failure to                
          file, a corresponding consistent failure to report substantial              
          amounts of income from the logging business; (3) the failure to             
          maintain books and records of the amounts derived from the                  
          logging business; (4) his failure to pay estimated income taxes             
          for the years in question; and (5) the cashing, rather than                 
          depositing, of checks derived from the logging business.                    
               In the instant case, petitioner did not file income tax                
          returns for the taxable years 1986 through 1991.  The parties               
          have stipulated this fact.  It is also without dispute that                 
          petitioner did not report relatively large amounts of income and            
          expenses in connection with his logging business.                           
               An initial analysis reveals that some of the badges of fraud           
          are present.  Petitioner earned substantial amounts of income               
          that were not reported, did not keep adequate records, and failed           
          to provide records to or meet with respondent's agent.  Due to              
          the 1989 audit of his 1985 Federal income tax return and the                
          seizure of his bank account, petitioner decided to close his bank           
          account and, to some extent, deal in cash.  Petitioner, however,            







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