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4. Badges of Fraud
a. Fraud as to Petitioner
Courts have developed several objective indicators, or
“badges”, of fraud. Recklitis v. Commissioner, 91 T.C. 874, 910
(1988). Several indicia that petitioner knew that he was taxable
on at least some of the funds he diverted from TCM are present in
this case.
Concealing income from one’s return preparer can be evidence
of fraud. Korecky v. Commissioner, 781 F.2d 1566, 1569 (11th
Cir. 1986), affg. T.C. Memo. 1985-63; Farber v. Commissioner, 43
T.C. 407, 420 (1965), modified 44 T.C. 408 (1965). Petitioner
did not give White records of any Camaro accounts or tell White
that he used Camaro funds for personal purposes or that he had
Camaro make payments to his family and friends. Petitioner did
not tell White that he received the NSA checks in Huntsville and
sent them to Hong Kong.
Petitioners contend that petitioner did not have signature
authority over Camaro’s bank accounts in 1987 and 1988 because
Camaro’s board of directors revoked petitioner’s signature
authority over Camaro’s SCB accounts by resolution dated December
13, 1983.
Respondent contends that SCB did not receive Camaro’s
revocation of petitioner’s signature authority. Petitioners
maintain that respondent has not proven that SCB did not receive
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