William F. Middleton - Page 11




                                       - 11 -                                         
               Traditionally, certain “badges” of fraud have been                     
         considered in deciding whether the penalty applies:                          
         (1) Understatement of income, (2) lack of adequate records, (3)              
         failure to cooperate with tax authorities, (4) concealment of                
         assets, (5) engagement in illegal activities, (6) dealing in                 
         large amounts of cash, (7) making of implausible and inconsistent            
         statements, and (8) the willingness to defraud another in a                  
         business transaction.  Bradford v. Commissioner, supra at 307-               
         308; Recklitis v. Commissioner, 91 T.C. 874, 910 (1988).                     
         Although no single factor is necessarily sufficient to establish             
         fraud, the existence of several indicia may provide persuasive               
         circumstantial evidence of fraud.  Miller v. Commissioner, 94                
         T.C. 316, 334 (1990).                                                        
               Respondent contends that, with respect to the original 1990            
         income tax return, petitioner fraudulently omitted taxi leasing              
         and Medicaid income.  At the time his original 1990 return was               
         filed, petitioner was receiving income from his taxi-leasing                 
         business and from the county government in connection with                   
         Medicaid transportation services.  Petitioner, in an attempt to              
         conceal that income, did not report that he was involved in a                
         taxi business or that he was being paid by the county in                     
         connection with Medicaid services.                                           
               Respondent, by means of a bank deposit analysis for 1990,              
         has shown that petitioner’s unexplained deposits far exceeded the            
         amount of gross income reported.  In addition, after petitioner’s            




Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next

Last modified: May 25, 2011