Stephen Martin Beddow - Page 9

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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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