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accounts. Mr. and Mrs. Reaves controlled the First Citizens
accounts. Reaves Livestock also underreported its income by
deducting the John Chavis checks which petitioners concede are
constructive dividends and not deductible expenses. Reaves
Livestock participated in the fraud involving the 282 checks, the
First Citizens accounts, and the John Chavis checks. Reaves
Livestock fraudulently underpaid tax with respect to the 282
checks, the deposits to the First Citizens accounts, and the John
Chavis checks for each year in issue.
We conclude that respondent has shown by clear and
convincing evidence that Reaves Livestock fraudulently intended
to underpay tax for 1984, 1985, 1986, and 1987.
3. Items Attributable to Corporate Fraud
We must identify the items with respect to which Reaves
Livestock fraudulently intended to underpay tax because 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 apply to
the portion of the underpayment attributable to fraud. As
discussed above in par. D-2, Reaves Livestock fraudulently
intended to underpay tax with respect to deductions it overstated
by deducting the 282 checks, checks for deposit to the First
Citizens accounts, and the John Chavis checks, and with respect
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