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(corporate fraud found from fraudulent intent of corporate
officers), affd. 959 F.2d 16 (2d Cir. 1992); Auerbach Shoe Co. v.
Commissioner, 21 T.C. 191, 194 (1953), affd. 216 F.2d 693 (1st
Cir. 1954); Moore v. Commissioner, T.C. Memo. 1977-275, affd. 619
F.2d 619 (6th Cir. 1980); cf. Asphalt Indus., Inc. v.
Commissioner, 384 F.2d 229, 233 and n.11 (3d Cir. 1967) (fraud of
a sole shareholder may be attributed to the corporation; however,
a corporation was not subject to fraud penalties where an
innocent stockholder owned one-half of the corporation), revg. 46
T.C. 622 (1966).
Courts have developed several objective indicators, or
"badges", of fraud. Recklitis v. Commissioner, 91 T.C. 874, 910
(1988). The badges of fraud present in this case are Dr. Cole's:
(a) Giving of false information to petitioner's tax return
preparer; (b) failure to use books and records; and (c) large
understatements of income.
a. Giving False Information to Petitioner's Tax
Return Preparer
Dr. Cole concealed petitioner's total gross receipts from
Mr. Lindblad by giving him inaccurate summaries and no supporting
documents, such as the day sheets and bank statements. Dr. Cole
asked Ms. Hale in December 1989 for petitioner's gross receipts
for fiscal year 1988. She told him they were $1,376,401.27, yet
he told Mr. Lindblad in February 1990 that petitioner's gross
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