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Respondent has met his burden of proving by clear and
convincing evidence that petitioners acted with the intention to
evade taxes in omitting the gas rebate income for each of the
years 1986, 1987, and 1988.
Proceeds From Sale of ACT’s Assets
Respondent also contends that petitioners acted with
fraudulent intention in underreporting the proceeds they each
received from the sale of ACT assets in 1988.
Petitioners identified the ACT transaction on their 1988 tax
returns and included in gross income well over half of the
$199,490 proceeds they each received from ACT’s sale of assets.
They omitted a portion of the proceeds from the sale of the
covenant not to compete and mischaracterized part of the proceeds
as repayment of a loan. Respondent has not clearly and
convincingly shown that, in reporting over half of the proceeds
from this transaction, petitioners acted fraudulently with regard
to the remainder.
Respondent asserts that petitioners attempted to disguise
the true nature of the “loan repayments”. In support of this
contention, respondent relies largely on evidence that ACT’s
accountants advised Daniell’s accountant that, consistent with
ACT’s treatment of the proceeds on its corporate books, Daniell
should report part of the proceeds as stockholder loans on his
individual Federal income tax return. Respondent has not clearly
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