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and Mrs. Reaves' personal returns or in providing the Reaves'
personal financial information to Davis. Mr. and Mrs. Reaves did
not rely on them for their personal taxes. Neither Mr. nor Mrs.
Reaves told Davis about the 282 checks, First Citizens accounts,
or the John Chavis checks. Since they did not disclose all
material facts to Davis, they may not now escape liability for
fraud by claiming they relied on him.
5. Items Attributable to Fraud
Respondent has shown by clear and convincing evidence: (a)
Mr. Reaves intended to evade tax with respect to the 282 checks
(respondent concedes that Mrs. Reaves did not know about the 282
checks); (b) Mr. and Mrs. Reaves intended to evade tax with
respect to the withdrawals from the First Citizens accounts that
they used for personal purposes; and (c) Mrs. Reaves intended to
evade tax with respect to the John Chavis checks for each year in
issue. Thus, Mr. Reaves is liable for the additions to tax under
section 6653(b)(1) with respect to the entire underpayment for
1984 and 1985. He is liable for the additions to tax under
section 6653(b)(2) for 1984 and 1985 and under section
6653(b)(1)(A) and (B) for 1986 and 1987 with respect to the
underpayments relating to the 282 checks and withdrawals from the
First Citizens accounts that Mr. and Mrs. Reaves used for
personal purposes.
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