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C. Remaining Badges of Fraud
Petitioner points out that factually, respondent’s case
rests on the understatements and the information provided to
lenders. There has been no showing or allegation that petitioner
(1) knowingly concealed income or assets, (2) failed to cooperate
with respondent, (3)engaged in illegal activities, (4) attempted
to mislead, (5) dealt in cash, (6) lacked credibility, or (7)
knowingly filed false documents.
On this record we conclude and hold that respondent has
failed to prove by clear and convincing evidence that petitioner
intended to evade taxes known to be owing by conduct intended to
conceal, mislead, or otherwise prevent the collection of taxes.
Accordingly, the exception for fraud did not serve to keep the
assessment period for 1992, 1993, or 1994 open under section
6501(c).
II. Respondent’s Alternative Argument Concerning Section
6501(c)(1)
Respondent also argues that, for purposes of indefinitely
extending the period for assessment under section 6501(c)(1),
petitioner’s state of mind is irrelevant. Section 6501(c)(1)
provides for an exception to the 3-year period for assessment of
section 6501(a), as follows:
False Return. In the case of a false or
fraudulent return with the intent to evade
tax, the tax may be assessed, or a proceeding
in court for collection of such tax may be
begun without assessment, at any time.
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