Wayne Payne and Dorene J. Payne - Page 13

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          Gunderson and the bank records, the 1995 amended return also                
          reported an incorrect amount of income.                                     
               In addition, Ms. Enerson credibly testified that she felt              
          there was an understanding between herself and petitioners that             
          she should not provide the information regarding income from the            
          extras to Mr. Gunderson.  Mrs. Payne helped Ms. Enerson gather              
          information for Mr. Gunderson.  Mrs. Payne testified that at some           
          point she knew that Mr. Gunderson had requested only bank                   
          records.  Mrs. Payne knew the extras were not deposited in the              
          bank; she helped separate out the checks for Mr. Payne to cash.             
          Petitioners’ assertion of ignorance is merely an attempt to                 
          absolve themselves of blame by attributing responsibility to                
          their bookkeeper.                                                           
               In addition, petitioners’ behavior with respect to their               
          income shows multiple badges of fraud.  Mr. Payne pleaded guilty            
          under section 7206(1) to willfully filing a false tax return for            
          1994.  As a result, Mr. Payne is estopped from arguing that he              
          did not willfully file a false return for 1994.  See Wright v.              
          Commissioner, 84 T.C. at 639.  Although the estoppel is not                 
          extended to petitioners’ fraudulent intent to evade tax,                    
          respondent has shown clear and convincing evidence that                     
          petitioners intended to evade tax for the years in issue.  HRDC’s           
          accounts receivable journal and bank deposit records both omitted           
          the income HRDC earned from extras and did not accurately reflect           

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