- 26 -26
DiLeo v. Commissioner, 96 T.C. at 875 (1991), ("[C]orporate fraud
necessarily depends upon the fraudulent intent of the corporate
officers."), affd. 959 F.2d 16 (2d Cir. 1992). In these cases,
Ferrentino is the sole shareholder and president of AJF. He
exercised total control over all the checks issued from J.C.
Penney to AJF. Ferrentino determined whether he would cash
checks personally or have them deposited into AJF's corporate
operating account. We think Ferrentino exercised sufficient
control over the affairs of AJF to justify imputing to AJF any
fraud committed by Ferrentino.
The existence of fraud is a question of fact to be resolved
upon examination of the entire record. Parks v. Commissioner, 94
T.C. 654, 660 (1990); Recklitis v. Commissioner, supra at 909.
Fraud is never presumed, but it must be established by
independent evidence. Beaver v. Commissioner, 55 T.C. 85, 92
(1970); Otsuki v. Commissioner, supra at 105. Fraud may be
proven by circumstantial evidence because direct evidence of the
taxpayer's intent is rarely available. Recklitis v.
Commissioner, supra at 910; Rowlee v. Commissioner, 80 T.C. 1111,
1123 (1983).
Circumstantial evidence of fraud includes:
(1) Consistent and substantial understatement of
income, (2) failure to maintain adequate records, (3)
failure to cooperate with an IRS investigation, (4)
inconsistent or implausible explanations of behavior
and (5) awareness of the obligation to file returns,
report income and pay taxes. [Douge v. Commissioner,
899 F.2d 164, 168 (2d Cir. 1990) (citing Bradford v.
Commissioner, 796 F.2d 303, 307-308 (9th Cir. 1986),
affg. T.C. Memo. 1984-601).]
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