- 11 -
and inferences drawn from the facts because direct proof of a
taxpayer's intent is rarely available. Niedringhaus v.
Commissioner, 99 T.C. 202, 211 (1992). The taxpayer's entire
course of conduct may establish the requisite fraudulent intent.
Stone v. Commissioner, 56 T.C. 213, 223-224 (1971).
Under section 61, gross income is defined as "all income
from whatever source derived". This includes unlawful earnings.
Accordingly, when a taxpayer acquires embezzlement proceeds,
without the consensual recognition of an obligation to repay and
without restriction as to disposition, he has income that he is
required to report. James v. United States, 366 U.S. 213, 219
(1961).
In this case, respondent presented clear and convincing
evidence that petitioner embezzled HUD funds in 1989 and did not
report them on his Federal income tax return. Respondent's
evidence satisfies the burden of proof independent of
petitioner's failure to meet his burden of proof regarding the
deficiency. Parks v. Commissioner, 94 T.C. 654, 661 (1990)
(stating that "We must be careful in such cases not to bootstrap
a finding of fraud upon a taxpayer's failure to prove
respondent's deficiency determination erroneous").
In 1988 and 1989, petitioner received HUD funds from loans
to fictitious entities while serving as the loan officer on those
loans. With respect to the HRW loan, proceeds of the $94,343.16
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011