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received from their rental properties. Moreover, as to Nanny’s’
1988 taxable year, respondent determined that Nanny’s accurately
reported all of its income for that year. Such a determination
obviously undercuts respondent’s position in this case that
petitioners: (1) Skimmed $40,670 of Nanny’s 1988 receipts for
their personal use without reporting those receipts for Federal
income tax purposes and (2) tried to conceal Nanny’s earning of
those receipts by dealing in cash and destroying the cash
register tapes. Respondent tries to downplay the fact that the
audit of Nanny’s 1988 taxable year concluded that Nanny’s income
was reported correctly on its Federal income tax return. As we
understand respondent’s position as to this fact, Revenue Agent
Smith reached this conclusion only because Nanny’s did not supply
him with any document that would disprove the reported amount.
We are unpersuaded that this is so. In addition to the fact that
Revenue Agent Smith testified to the contrary, we find it
unlikely given the facts herein that respondent would have
conceded that Nanny’s income was reported correctly simply
because Nanny’s kept in its records no documentation that showed
otherwise.
Nor do we reach a finding of fraud on the basis of our
review of the remaining badges of fraud. Petitioners did not
attempt to conceal any assets. They did not engage in an illegal
activity. They did not attempt to conceal an illegal activity.
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