Richard and Rebecca Adair - Page 11




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             Indicia of fraud include:  (1) Understatements of income;                
        (2) inadequate books and records; (3) implausible or inconsistent             
        explanations of behavior; and (4) lack of cooperation with tax                
        authorities.  See Bradford v. Commissioner, 796 F.2d 303, 307-308             
        (9th Cir. 1986), affg. T.C. Memo. 1984-601; Clayton v.                        
        Commissioner, 102 T.C. 632, 647 (1994); Petzoldt v. Commissioner,             
        92 T.C. 661, 699-700 (1989); Recklitis v. Commissioner, 91 T.C.               
        874, 910 (1988).                                                              
             Petitioners have not alleged any nontaxable sources of income,           
        and the roofing business constitutes the likely taxable source of             
        the deposits into the checking account.                                       
             With regard to fraudulent intent, the evidence establishes for           
        each year in issue that petitioners realized significant income               
        that they failed to report, that petitioners failed to provide to             
        respondent’s agents books and records relating to the roofing                 
        business, that petitioners failed to pay significant tax                      
        liabilities that they owed, that petitioners did not cooperate with           
        respondent, and that petitioners made erroneous tax protester                 
        objections to the tax laws.  Respondent has proven by clear and               
        convincing evidence petitioners’ fraud in regard to their Federal             
        income taxes.  We conclude that all of the taxable income charged             
        to petitioners herein is attributable to fraud.                               










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