James E. and Chung H. Peacock - Page 40

                                        -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                 






Page:  Previous  26  27  28  29  30  31  32  33  34  35  36  37  38  39  40  41  42  43  44  45  Next

Last modified: May 25, 2011