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return for 1994, petitioner knew he was not reporting his income
from his accounting business or the income attributable to JJH’s
payment of his personal expenses, and he knew this was contrary
to the tax law. See Taxpayers Assistance Corp. v. Commissioner,
T.C. Memo. 1988-343 (taxpayer’s background and experience taken
into account as evidence of fraud).
Petitioner used JJH, CCA, and Coastal to conceal his income
and personal expenses. The corporations were a critical part of
his scheme. Petitioner frequently circulated funds among JJH,
Coastal, and CCA for no business purpose and then used the funds
in these accounts to pay personal expenses. JJH’s and Coastal’s
bank accounts were petitioner’s and Charlene’s personal
pocketbook. CCA’s bank account was also Charlene’s personal
pocketbook, and petitioner funneled money from JJH and Coastal to
this account to fund Charlene’s expenditures. The use of a
corporation to disguise the personal nature of income and
expenses is evidence of fraud. See Truesdell v. Commissioner, 89
T.C. 1280, 1302-1303 (1987); Benes v. Commissioner, 42 T.C. 358,
383 (1964), affd. 355 F.2d 929 (6th Cir. 1966).
Petitioner claimed the living expenses detailed in our
findings of fact as business expenses on JJH's return, concealing
them as cost of goods sold. Petitioner deliberately
mischaracterized JJH’s business activity on its returns to create
the appearance JJH was a merchandise business rather than a
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