- 13 -
underreported income in both years; namely, $64,327 in 1995 and
$40,562 in 1996. Accordingly, respondent has met his burden of
showing by clear and convincing evidence that petitioner had
underpayments of tax in 1995 and 1996.
On the question of whether these underpayments are
attributable to fraud, respondent has demonstrated several badges
of fraud, as follows. Petitioner failed to report income in both
years, indicating a pattern of underreporting. The unreported
amounts were substantial in relation to petitioner’s reported
gross receipts; namely, $64,327 of unreported income versus
reported gross receipts of $12,652 in 1995, and $40,562 of
unreported income versus reported gross receipts of $37,311 in
1996. The magnitude of the unreported amounts makes it virtually
impossible that they could have been due to mere mistake or
inadvertence.
Petitioner’s records were clearly inadequate. While he was
able to substantiate certain expenses, petitioner did not
maintain or produce regular books or records from which the
income from his Schedule C businesses could be ascertained.
Petitioner gave numerous implausible explanations for his
failure to report income. He offered three inconsistent
explanations for his failure to report the $37,800 in income that
he received from Johnson Controls, Inc., in 1995. Moreover, his
claim that he did not receive the Form 1099-MISC from Johnson
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011