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opaque series of transfers in 1987 and 1988. Petitioner knew
about but did not report the diverted payments. This badge of
fraud applies to petitioner for 1987 and 1988 because he
knowingly diverted NSA’s payments for his personal use in both
years.
Petitioners contend that the fact that respondent took 8 to
10 years to determine the taxation of the unreported income in
dispute here shows that respondent had doubts about this case and
so has not proven by clear and convincing evidence that
petitioner and TCM are liable for fraud for the years in issue.
We disagree. Petitioner should not benefit from the fact that it
took respondent a long time to penetrate the maze petitioner
chose to create.
Respondent has clearly and convincingly proven that
petitioner had the requisite fraudulent intent, and that all of
petitioner’s underpayments are due to fraud.11 Thus, petitioner
is liable for the addition to tax for fraud under section 6653(b)
for 1987 and 1988.
b. Fraud as to TCM
We have found that petitioner is liable for the fraud
penalty for 1987 and 1988. See paragraph B-4-a, above.
11 Even if we found that respondent established by clear
and convincing evidence that petitioner is liable for fraud only
on the payments he diverted from TCM to Double D or his own
checking account, the burden would then shift to petitioner to
show how much of the underpayment is not due to fraud. Sec.
6653(b)(2). Petitioner has not shown that any of the
underpayments for 1987 and 1988 was not due to fraud.
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