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the actions of Mr. Golden, petitioner’s president and sole
shareholder.
To decide whether the fraud penalty is applicable, courts
consider several indicia of fraud, or “badges of fraud”, which
include: (1) Understatement of income; (2) inadequate books and
records; (3) failure to file tax returns; (4) implausible or
inconsistent explanations of behavior; (5) concealment of assets;
(6) failure to cooperate with tax authorities; (7) filing false
Forms W-4; (8) failure to make estimated payments; (9) dealing in
cash; (10) engaging in illegal activity; and (11) attempting to
conceal illegal activity. See Bradford v. Commissioner, 796 F.2d
303, 307 (9th Cir. 1986), affg. T.C. Memo. 1984-601; Recklitis v.
Commissioner, 91 T.C. 874, 910 (1988). This list is
nonexclusive. See Miller v. Commissioner, 94 T.C. 316, 334
(1990).
As an initial matter, petitioner concedes that it overstated
its business expenses claimed as deductions on its corporate
income tax returns for 1993, 1994, and 1995. Petitioner further
concedes that it failed to report income on its 1994 and 1995
income tax returns. These concessions result in petitioner’s
being liable for deficiencies in income tax for its 1993, 1994,
and 1995 tax years, and respondent has therefore met his burden
of showing petitioner’s understatement of taxes for 1993, 1994,
and 1995.
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