- 16 -
receipts were only $1,135,781. The fact that Dr. Cole gave false
information to the corporate return preparer is a badge of fraud.
Korecky v. Commissioner, 781 F.2d 1566, 1569 (11th Cir. 1986),
affg. per curiam T.C. Memo. 1985-63; Estate of Temple v.
Commissioner, 67 T.C. 143, 162-163 (1976).
b. Failure To Use Books or Records
Dr. Cole had access to petitioner's day sheets and bank
statements. The fact that Dr. Cole did not use these records in
preparing petitioner's returns is a badge of fraud. Spill v.
Commissioner, T.C. Memo. 1989-213 (fraud is "even more apparent"
where taxpayer kept records but disregarded them in preparing tax
return).
c. Large Understatements of Income
Dr. Cole caused petitioner to not report its income
accurately for the years in issue. Petitioner knowingly failed
to report a significant amount of income for fiscal years 1987
and 1988. This is a badge of fraud. Bradford v. Commissioner,
796 F.2d 303, 307-308 (9th Cir. 1986), affg. T.C. Memo. 1984-601.
3. Conclusion--Fraud
Petitioner knowingly understated its income by $339,307 for
fiscal year 1987 and $265,140 for fiscal year 1988. We conclude
that petitioner is liable for the additions to tax for fraud for
fiscal years 1987 and 1988.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011