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contradictory and evasive. We also note that, in the District
Court suit, involving the Gordons, the judge found petitioner to
be uncooperative and responsible for delaying the course of the
lawsuit.
Petitioner’s lack of knowledge and apparent lack of concern
with respect to the operation of the trust, which contained what
she claimed to be her life savings of over $1 million, gives us
no confidence in her claim that the trust was funded with her and
not husband’s funds. Petitioner has failed to rebut the
inference from the statements and findings of the State Court and
District Court that the trust was funded with the embezzlement
income and liquidating dividend that husband failed to report for
1986, and we so find. Indeed, the District Court explicitly
found that petitioner was complicit in the fraudulent conveyance
of funds to the trust, and we find likewise. Whether all of the
1986 unreported income went to the trust or not is not critical.
Certainly, because of the conveyance of stocks and bonds with an
approximate fair market value of $1,150,509 to the trust,
petitioner significantly benefited from husband’s unreported
income of approximately $1.4 million, and that is enough for us
to determine that it is not inequitable to hold her liable for
the deficiency in tax. See sec. 1.6013-5(b), Income Tax Regs.
(interpreting the predecessor of section 6015(b)(1)(D)).
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