-40-
This badge of fraud applies to both petitioners for each year in
issue.
d. Filing False Payroll Tax Returns
Filing false payroll tax returns is an indication of fraud.
See Estate of Santuccio v. Commissioner, a Memorandum Opinion of
this Court dated April 11, 1952. Petitioner-husband directed
that pre-signed payroll papers be prepared and provided to
petitioners' income tax return preparer showing that masseuses
were paid about $200 a week. Petitioner-husband withheld taxes
from the masseuses at a fixed amount regardless of how much money
the masseuses earned and issued Forms W-2 which he knew showed
substantially less income than the masseuses earned. This badge
of fraud applies to petitioner-husband for each year in issue.
e. Implausible or Inconsistent Explanations
Implausible or inconsistent explanations of behavior by a
taxpayer can show fraudulent intent. Bradford v. Commissioner,
supra at 307. Many of petitioners' explanations of their
behavior are implausible or inconsistent. Petitioner-husband
testified that the Joplin Tokyo Sauna closed due to zoning
changes; however, it closed because prostitution was occurring on
its premises. Petitioner-husband stated that he did not keep
money in banks, yet petitioners maintained bank accounts which
paid $30,800 in interest from 1983 to 1987 and IRA accounts
during the years in issue. Petitioner-wife denied that she
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