Hugh Wilkinson and Evelyn Wilkinson - Page 14

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          without fraudulent intent.  The conviction under section 7203                
          only provides some evidence of fraud as to the 1988 tax year.  It            
          does not conclusively establish fraud for that year.                         
          Furthermore, Dr. Wilkinson's conviction for the 1988 return does             
          not establish fraud as to the 1989 return.                                   
               Second, respondent argues that petitioners' understatement              
          of income is evidence of fraud.  Respondent points to the fact               
          that petitioners failed to report in a timely manner Schedule C              
          gross income for 1988 and 1989 in the amounts of $708,220 and                
          $792,444, respectively.  We do not find this fact dispositive.               
          Petitioners did file their tax returns, even if they did so                  
          delinquently.  Except for the capital loss carryover, respondent             
          made no adjustments to the amounts reported on those returns.                
          Petitioners also did not attempt to conceal assets.  They did not            
          earn any income from illegal activities, and they did not have               
          substantial dealings in cash.  These facts weaken respondent's               
          argument as to this indicium of fraud.                                       
               Third, respondent argues that petitioners' failure to pay               
          estimated taxes equal to their 1988 and 1989 tax liabilities is              
          evidence of fraud.  We disagree.  Under the facts herein, we do              
          not give much weight to the fact that petitioners failed to make             
          timely estimated tax payments equal to their tax liabilities.  As            
          a point of fact, petitioners made estimated tax payments for 1988            
          and 1989 totaling $5,000 and $8,000, respectively.  It is also               
          relevant that petitioners reported (but failed to pay) a balance             

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