- 42 -
1984, 1985, 1986, and 1987, because they both knowingly received
diverted income for their personal use in each of those years.
g. Conviction Under Section 7206(1)
A conviction for willfully and knowingly subscribing to a
false income tax return under section 7206(1) is evidence that
the taxpayer fraudulently intended to evade taxes. Wright v.
Commissioner, 84 T.C. at 643-644. Mrs. Reaves pleaded guilty to
violating section 7206(1) for 1986. Mr. Reaves pleaded guilty to
violating section 7206(1) for 1987. This badge of fraud applies
to Mrs. Reaves for 1986 and Mr. Reaves for 1987.
4. Reliance on Wright, Lawson, and Davis
Mr. and Mrs. Reaves contend that they are not liable for the
addition to tax for fraud because they relied on Wright, Lawson,
and Davis to correctly prepare their income tax returns. We
disagree.
A taxpayer is not liable for the addition to tax for fraud
under section 6653(b) if the taxpayer relied in good faith on a
qualified accountant and disclosed all material facts necessary
to prepare a correct tax return. Alexander Shokai, Inc. v.
Commissioner, 34 F.3d 1480, 1486 (9th Cir. 1994), affg. T.C.
Memo. 1992-41; United States v. Whyte, 699 F.2d 375, 379-380 (7th
Cir. 1983); United States v. Garavaglia, 566 F.2d 1056, 1060 (6th
Cir. 1977). Wright and Lawson were not involved in preparing Mr.
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