Ella Freidus - Page 27

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          to file returns, report income, and pay taxes.  See id. at 1005.             
          The taxpayer's total gross income for his 1954 taxable year                  
          dictated the inference that he knew he owed taxes for that year.             
          In the case before us no inference is necessary because                      
          petitioner herself testified that had she prepared and filed tax             
          returns for the 1987 and 1990 taxable years, she would have owed             
               Furthermore, Nelon v. Commissioner, supra, is                           
          distinguishable.  In that case, the taxpayer, a high school                  
          dropout and inexperienced in bookkeeping and financial matters,              
          operated a logging business as a sole proprietorship.  The                   
          taxpayer's income from his logging business could easily be                  
          traced from the Forms 1099 supplied by payers.  The taxpayer                 
          joined a tax protester group and did not file tax returns under              
          the belief that he was not subject to Federal income tax.  The               
          Commissioner asserted that the taxpayer was liable for the                   
          addition to tax for fraud, contending that the following facts               
          established fraud: (1) Failure to file tax returns for 5                     
          consecutive years; (2) consistent failure to report substantial              
          amounts of income; (3) failure to maintain books and records of              
          his logging business; (4) failure to pay estimated taxes; and (5)            
          cashing, rather than depositing, checks derived from his logging             
          business.  We held that the Commissioner did not clearly and                 
          convincingly establish that the taxpayer's underpayment was due              

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