Terrell Equipment Company, Inc., et al. - Page 14

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          disagree.  Respondent makes this argument even though, as we                
          previously noted, RA Craddock testified that Vernon was                     
          forthcoming and did not do anything to hide or cover up issues RA           
          Craddock raised.  There is no evidence in the record that                   
          petitioners misled RA Craddock.                                             
               3. Personal Expenses                                                   
               Respondent contends that he established fraud by proving               
          that Vernon and Janet paid personal expenditures with TECO funds,           
          TECO deducted these personal expenses, and Vernon and Janet                 
          failed to report these amounts as income.                                   
               Petitioners do not deny that TECO paid personal expenses of            
          Vernon and Janet.  In fact, Vernon was forthcoming and forthright           
          in his testimony that TECO paid personal expenses of Vernon and             
               As we noted supra, Janet credibly testified that she made an           
          honest attempt to come up with the figures listed on the Forms              
          1099, and the parties stipulated that Vernon and Janet intended             
          for the amounts listed on these Forms 1099 to cover the amount of           
          personal expenses paid for, and withdrawals made by, Vernon out             
          of TECO’s funds.  If petitioners failed to list the exact amount            
          of Vernon and Janet’s personal expenses paid for with TECO funds            
          on the Forms 1099, we conclude that it was not due to fraud.                
               4.  Remaining Badges of Fraud                                          
               The remaining badges of fraud are understating income and              
          filing false documents.  The evidence does not establish that               

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