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Petitioners contend that Katherine kept records of daily
receipts and bills and delivered them to Baptiste for preparation
of the tax returns, but they are no longer available due to the
passage of time. Petitioners maintain that Katherine did the
best she could, but her ability to keep records was limited
because of her lack of education, illiteracy, lack of
sophistication, and poor health. Petitioners, however, do not
explain why no records were presented to respondent for any year
in issue during the course of the audit which commenced in 1991.
We agree with respondent that the record does not support a
finding that Frank or Katherine was incapable of keeping records
during the years in issue. They did present at least some
records to their tax preparer. Moreover, Sylvia lived with them
for most of that time, and she performed bill-paying services for
them. Petitioners do not explain why Sylvia also could not have
maintained their records while she lived with them. The
circumstances of the large understatements of income over the
years in issue show that Frank and Katherine failed to maintain
adequate records of income and expenses. Their lack of
recordkeeping, coupled with a clear pattern of underreporting
substantial amounts of income over a period of 8 years, leads to
a particularly strong inference of fraudulent intent.
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