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the Vortex factory with Alex Srebrianski and U.S. Trading and
used the ostensible leasing transaction to launder a portion of
the cash generated by the plastic vial sales. A taxpayer’s
attempt to conceal its illegal activity, particularly when the
attempt contributes to the understatement of a taxpayer’s income,
is an indication of fraud. Spies v. United States, 317 U.S. 492,
499 (1943).
(6) Extensive Dealings in Cash. Vortex amassed a
considerable cash hoard and used some of the cash to pay some of
Vortex’s expenses, including the cost of raw materials and Alex
Srebrianski’s salary.
Based on the above, we hold that Vortex’s underpayment of
tax resulting from its failure to report proceeds from the sale
of plastic vials on its Federal income tax returns for FYEs 1991
and 1992 was attributable to fraud and that therefore Vortex is
liable for the fraud penalty under section 6663 for each of those
years.
B. The Fraudulent Failure To File Penalty Against
Vortex for FYE 1993
Respondent determined that Vortex was liable for the
addition to tax pursuant to section 6651(f)13 for fraudulently
13Sec. 6651(a) imposes an addition to tax for late filing
equal to 5 percent of the amount required to be shown on the
return if a taxpayer files within 1 month of the date prescribed.
That section further imposes an additional 5-percent addition to
tax for each additional month or fraction thereof that the return
(continued...)
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