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We do not accept Mr. Coyle’s testimony that the income he
reported on his returns for 1992 and 1993 was his only income for
those years. See Tokarski v. Commissioner, 87 T.C. 74, 77
(1986). We conclude that Mr. Coyle failed to report income
received from Regal in 1992 and 1993 of $21,130 and $18,816,
respectively.
3. Fraud
Respondent affirmatively alleges that Regal and Mr. Coyle
are liable for civil fraud penalties under section 6663.
Specifically, respondent claims that petitioners committed fraud
because: Mr. Coyle directed Regal to maintain false books in
which gross receipts from sales of wheels and axles were not
recorded and ensured that Regal’s and his own accountant was not
provided with the receipts from the sales of wheels and axles;
neither Regal nor Mr. Coyle recorded the cash received in Regal’s
books or deposited the money in any of Regal’s bank accounts; Mr.
Coyle ensured that Regal received cash when it sold wheels and
axles; Mr. Coyle directed that cash from sales of wheels and
axles be paid to him; Mr. Coyle substantially understated his
income for 1992 and 1993; and Mr. Coyle’s income tax return
filing history indicates a consistent pattern of underreporting
his income tax liability.
Section 6663 imposes a penalty of 75 percent on the portion
of any underpayment of tax required to be shown on a return that
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