- 154 -
law firm’s trust account were taxable, and petitioner agreed.98
We cannot accept petitioner’s explanation that he misunderstood
that if sales proceeds and other items were “reinvested” and held
in trust accounts, they would not be taxable until withdrawn for
“wine, women, and song”. Respondent has produced evidence
showing that substantial amounts of income were paid from the
trust account per petitioner’s instructions for personal expenses
and that those withdrawals were not reported as income on his tax
returns. Petitioner did not inform respondent’s revenue agent,
who examined his returns for 1985-1988, that he held this belief
regarding tax deferred exchanges, and there is no credible
evidence of record showing that petitioner had this purported
misunderstanding.
Respondent has also proven by clear and convincing evidence
that petitioner’s method of preparing his return for 1985 was
done with a fraudulent intent. On the Schedule C for his real
estate business, petitioner reported income and expenses from
that business on the basis of spreadsheets of the deposits and
disbursements from his personal bank accounts. He reported the
deposits, less amounts he classified as “loans”, as gross income
from his business, and the disbursements, as deductible expenses
on the Schedule C. Many of the disbursements were for inherently
98Also, the Tax Court’s stipulated decision with respect to
petitioner’s agreed deficiencies for 1977, 1978, 1979, 1981, and
1982, was entered before petitioner’s filing of each of his
returns for the 1985 through 1988 tax years.
Page: Previous 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 162 163 NextLast modified: May 25, 2011