- 65 -
correct income for each year in issue. They maintain that
neither Frank nor Katherine was capable of generating the kind of
income determined by respondent for the years in issue.
We agree with respondent that the substantial
understatements of income we found for the years in issue are a
strong indication of fraudulent intent. From each of the years
1983 through 1990, Frank and Katherine failed to report a
substantial amount of income. The record does not support a
finding that neither Frank nor Katherine could generate the
unreported income in issue. Katherine maintained her palmistry
business throughout the years in issue, and she and Frank
frequently engaged in gambling activities. The pattern of
underreporting substantial amounts of income over a period of 8
years leads to a strong inference of fraudulent intent.
(2) Lack of Records
Respondent contends that Frank and Katherine failed to
provide respondent with whatever records they maintained and
provided to their tax preparer. Respondent contends that the
following circumstances negate any attempt by petitioners to
assert that neither Katherine nor Frank could keep records: Both
Frank and Katherine could write numbers; Frank could add numbers;
Katherine could add a column of numbers and count money; she
could figure the cost of her advertising spots; and she kept a
writing tablet to record receipts.
Page: Previous 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 NextLast modified: May 25, 2011