- 56 -
have had no way of knowing whether or not the projections proved
true, other than based on information that petitioners provided
to him.
The August 31, 1988 unaudited personal financial statements
contained caveats indicating that the figures in those statements
were based on representations of petitioners and that Mr. Dennett
took no responsibility for their accuracy.18 We do not believe
that Mr. Dennett should have had in mind those unaudited,
partial-year financial statements of petitioners at the time he
was preparing their return for 1988. Nor do we believe that
those unaudited statements should have caused Mr. Dennett to know
that the income reported by petitioners in their 1988 return was
understated or that petitioners could not have accumulated the
assets reflected in those unaudited statements with the income
that they reported in their returns for the years at issue.
On the record before us, we find that petitioners have not
come forward with credible and reliable evidence to contradict
respondent's clear and convincing evidence establishing the
following badges of fraud from which petitioners' fraudulent
intent may be inferred for 1986 and 1988: (1)(a) Petitioners
18 The Aug. 31, 1988 unaudited personal financial statements did
not, as petitioners contend, provide information on a "complete
and accurate basis" about petitioners' assets because those
statements did not include information with respect to petition-
ers' checking accounts at Indian Head or their bank accounts at
Kennebunk, nor did they include information with respect to
petitioners' stockholdings in White Star.
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