-22-
Douge v. Commissioner, 899 F.2d 164, 168 (2d Cir. 1990); Bradford
v. Commissioner, 796 F.2d 303, 307-308 (9th Cir. 1986), affg.
T.C. Memo. 1984-601; Recklitis v. Commissioner, 91 T.C. 874, 910
(1988).
Following our consideration of the relevant badges of fraud,
we conclude that respondent has clearly and convincingly proven
the requisite fraudulent intent on the part of the Les for each
year in issue. The Les understated their income on their 1990
and 1991 individual tax returns by not recognizing income from
the attorney checks which they diverted from DDL in the amounts
totaling $295,941 and $197,673, respectively. They attempted to
conceal this income by not recording those checks in DDL’s
records (i.e., by not maintaining proper records for DDL), by not
depositing those checks into DDL’s bank account, by not advising
their tax preparer of the checks’ existence, and by not reporting
the diverted funds on DDL’s corporate income tax returns or on
their individual income tax returns. They engaged in illegal
activities in that they filed fraudulent tax returns. They
provided implausible or inconsistent explanations of their
behavior. They failed to cooperate with tax authorities. They
pleaded guilty to certain charges as to their and DDL’s 1990
income tax returns. Although a conviction under section 7206(1)
does not by itself establish intent to evade tax, since the
existence of such intent is not an element of the crime, the
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