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(3) Filing History
Respondent contends that Frank and Katherine’s failure to
file Federal income tax returns for 1986, 1987, and 1988 until
contacted by Revenue Office Budde and their failure to file gift
tax returns for any year in spite of vast amounts of gift giving
to family members each year are indicia of fraud. Petitioners
maintain that Frank and Katherine were not required to file
returns for 1986 through 1988 because their income for those
years did not meet the threshold income requirement. Petitioners
do not explain why Frank and Katherine did not file gift tax
returns to report the gifts they gave their children and
grandchildren during the years in issue.
Frank and Katherine filed timely income tax returns for some
of the years in issue, which shows that they understood their
obligation to file returns and pay tax. We agree with respondent
that the circumstance of Frank and Katherine’s not filing income
tax returns for 1986 through 1988 even though Katherine continued
to operate her business during those years is another indicium of
fraudulent intent. Additionally, we agree that Frank and
Katherine’s failure to file gift tax returns relating to the
substantial gifts they made to their children and grandchildren
during those years also indicates an intent to conceal and
mislead.
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