- 14 - inadequate recordkeeping in determining fraudulent intent). Mr. Welker exclusively received cash payments from Brockland Pontiac and kept no records of the payments. This is evidence of fraud. C. Conclusion After reviewing all of the facts and circumstances, we conclude that respondent has clearly and convincingly proven that the underpayment of tax for each of the years in issue was due to fraud on the part of Mr. Welker. Therefore, we sustain respondent's determination that Mr. Welker is liable for additions to tax for fraud pursuant to section 6653(b)(1) and (b)(2) for 1984 and 1985, and section 6653(b)(1)(A) and (b)(1)(B) for 1986 and 1987. Addition to Tax for a Substantial Understatement On brief, petitioners argue that respondent committed an abuse of discretion by failing to waive the addition to tax for a substantial understatement because Mr. Welker provided a reasonable explanation for the understatement and held a good faith, but mistaken, belief that the cash payments were gifts. Respondent argues that there was no abuse of discretion in failing to waive the addition to tax because no reasonable cause exists. Petitioners failed to establish at trial that there was reasonable cause for treating the cash payments as gifts or that Mr. Welker believed in good faith that they were gifts. To the contrary, in his criminal case he admitted that when he filed hisPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
Last modified: May 25, 2011