AJF Transportation Consultants, Inc. - Page 25




                                                    - 25 -25                                                      

             to sustain a dividend.  Therefore, the constructive distributions                                    
             from AJF to Ferrentino must be included in Ferrentino's income as                                    
             a dividend.                                                                                          
                    Accordingly, we hold that respondent has shown by clear and                                   
             convincing evidence that Ferrentino had underpayments in tax for                                     
             the years in issue due to unreported dividend income in the                                          
             amounts he diverted from AJF by cashing the Custom Decorating and                                    
             fuel reimbursement checks.                                                                           
                    B.  Underpayments Due to Fraud                                                                
                    Since we have found that respondent has shown by clear and                                    
             convincing evidence that petitioners had underpayments of tax for                                    
             the years in issue, the next issue is whether some part of                                           
             petitioners' underpayment each year was due to fraud with the                                        
             intent to evade tax.  Fraud is established by showing that the                                       
             taxpayer intended "to evade tax believed to be owing by conduct                                      
             intended to conceal, mislead, or otherwise prevent the collection                                    
             of such tax."  Recklitis v. Commissioner, 91 T.C. at 909.  Tax                                       
             evasion need not be a primary motive, but the respondent may                                         
             satisfy his burden by showing that a "'tax-evasion motive                                            
             [played] any part' in petitioner's conduct".  Id.  Respondent                                        
             must establish fraud on the part of each petitioner for each                                         
             taxable year involved by clear and convincing evidence.  Otsuki                                      
             v. Commissioner, 53 T.C. 96, 105 (1969).                                                             
                    The fraud of a sole or dominant shareholder can be                                            
             attributed to the corporation.  Benes v. Commissioner, 42 T.C.                                       
             358, 383 (1964), affd. 355 F.2d 929 (6th Cir. 1966); see also                                        

Page:  Previous  14  15  16  17  18  19  20  21  22  23  24  25  26  27  28  29  30  31  32  33  Next

Last modified: May 25, 2011