Domer L. Ishler - Page 30

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          Respondent also contends that TCM is liable for fraud for failure           
          to report substantially the same amounts for 1987 that petitioner           
          prevented TCM from receiving.  Specifically, respondent contends            
          that TCM is liable for fraud for 1987 because petitioner                    
          concealed from TCM’s tax preparer information about the NSA,                
          Midtex Relays, and other checks diverted from TCM’s account,                
          petitioner signed TCM’s 1987 return even though he knew it was              
          inaccurate and omitted substantial income, TCM pled guilty under            
          section 7206(1) to knowingly making false statements on its                 
          amended 1988 return, and petitioner used a complex series of                
          transactions to divert payments from NSA to himself and Camaro.             
               Fraud is never presumed or imputed; it must be established             
          by independent evidence of fraudulent intent.  Toussaint v.                 
          Commissioner, 743 F.2d 309, 312 (5th Cir. 1984), affg. T.C. Memo.           
          1984-25; Petzoldt v. Commissioner, 92 T.C. 661, 700 (1989);                 
          Beaver v. Commissioner, 55 T.C. 85, 92 (1970).  We may not impute           
          from our finding that petitioner is liable for fraud that TCM is            
          also liable for fraud.  To establish that TCM is liable for the             
          fraud penalty for 1987, respondent must show by clear and                   
          convincing evidence that, as president and CEO of TCM,                      
          petitioner, in addition to having knowledge of his own obligation           
          to report the income he prevented TCM from receiving, knew that             
          TCM was liable for tax on at least some of the funds he caused              

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