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Regarding 1987, petitioner was convicted of income tax
evasion pursuant to section 7201. As a result, petitioner is
collaterally estopped from denying liability for civil fraud with
respect to 1987. See Gray v. Commissioner, 708 F.2d 243, 246
(6th Cir. 1983), affg. T.C. Memo. 1981-1; Roots v. Commissioner,
supra. The second prong is met for 1987.
As to 1986, the "badges of fraud" are plentiful, including
that petitioner: (1) Failed to file a Federal income tax return,
(2) engaged in illegal activities, (3) dealt in cash, (4) failed
to keep books and records of his illegal activities, (5)
attempted to conceal activities from law enforcement, and (6)
failed to make estimated tax payments. Perhaps the best evidence
of petitioner's fraudulent intent came straight from his mouth.
Petitioner's deceitful conduct and motives were unknowingly
documented by secret audio tape, the transcript from which was
evidence in this case. Petitioner bragged about the thousands of
dollars in cash he made from dealing in drugs and about
extravagant cash purchases of gems and a boat. He expressed his
desire to get his money offshore to avoid taxes. We are
convinced petitioner knew that he owed taxes on his 1986 income
and that he intended to evade the tax. The second prong is
satisfied for 1986.
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