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4. Failure To Maintain Adequate Records
Taxpayers are required to keep such records as are necessary
for the determination of tax. See sec. 6001. The failure to
keep adequate records is a badge of fraud. See Bradford v.
Commissioner, supra at 307.
During the years in issue, petitioners transferred
$1,478,399 from two Radtam accounts into their personal bank
accounts. Despite the significant transfers between Radtam’s
accounts and personal accounts, petitioners appear to have
maintained no records of these transactions. Rather, they argue
that they were unaware of the accounting problems being created
and that they lacked the technical ability to keep corporate
books or prepare tax returns.
Petitioners also deposited $590,689 in cash into their
personal bank accounts. At trial, Mr. Bacon testified he did not
know the source of these significant cash deposits.
While Mr. Bacon testified that he was unaware of the
problems created by commingling funds, his testimony is self-
serving, and we do not find him to be credible. Mr. Bacon
appears to us to be an astute businessman and investor. It would
have required relatively little, if any, technical ability to
maintain, or hire a bookkeeper to maintain, a record of transfers
between corporate and individual accounts or records of the
source of petitioners’ substantial cash deposits to their
personal accounts.
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