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returns to be accurate at the time he signed them. He was not
aware that the payments to the workers should have been included
in the employment tax returns, and, in any event, he was not
specifically aware that the payments were not so included.
Furthermore, petitioner did not know that the payments to the
workers had been coded for accounting purposes as distributions
to himself. Petitioner’s testimony in this regard was highly
credible, and we note that it was corroborated by the testimony
of his former office manager and his outside accountant.
Ms. Gerber stated that she had no problems with Mr. Neely in
terms of his honesty with her and that he never asked her to do
anything that made her uncomfortable in terms of her job
responsibilities and duties. Similarly, Mr. Messmer testified
that he at no time had reservations as to petitioner’s
forthrightness and honesty in terms of producing the documents
and information necessary for him to prepare full and accurate
tax returns. Even the revenue agent who conducted the
examination of petitioner’s income tax return conceded that
petitioner cooperated with her in every aspect requested and
provided her with all pertinent records and documents. These
witnesses do not paint petitioner as one out to deprive the
Commissioner of his rightful tax revenue.
The only potential “badge of fraud” in this case is
petitioner’s agreement to pay the workers in cash. The cash
arrangement, however, was not part of a scheme on the part of
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