Phillip Vazzana and Estate of Yvonne Vazzana, Deceased, Phllip Vazzana, Executor - Page 9

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               Petitioners have conceded that they failed to report                   
          significant amounts of income that they received from V&V and               
          their rental property.  In addition, they have failed to                    
          establish that such amounts are offset by unreported expenses.              
          Therefore, we conclude that respondent has presented sufficient             
          evidence that petitioners underpaid their taxes for the years in            
          issue.                                                                      
               B.  Fraudulent Intent                                                  
               To prove fraud, respondent must establish that petitioners             
          intended to evade taxes through conduct designed to conceal,                
          mislead, or otherwise prevent the collection of taxes.  Rowlee v.           
          Commissioner, 80 T.C. 1111, 1123 (1983).  Fraudulent intent is              
          not to be imputed or presumed, but may be established by                    
          circumstantial evidence and reasonable inferences drawn from the            
          facts.  Spies v. United States, 317 U.S. 492, 499 (1943);                   
          Petzoldt v. Commissioner, supra; Stephenson v. Commissioner, 79             
          T.C. 995, 1006 (1982), affd. 748 F.2d 331 (6th Cir. 1984).  The             
          mere existence of deficiencies in tax liability does not                    
          establish fraud.  Otsuki v. Commissioner, 53 T.C. 96, 106 (1969).           
          Exceedingly large, unexplained discrepancies between a taxpayer's           
          actual income and reported income, however, do evidence fraud.              
          Stone v. Commissioner, 56 T.C. 213, 224 (1971).                             
               Respondent has provided sufficient evidence that petitioners           
          failed to report V&V gross receipts of $121,289 for 1988 and                





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