James J. Coyle - Page 17

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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,                
          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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