Paul Bi-Yang Chen and Chiu-Mei Chen - Page 7

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          such circumstantial evidence as: (1) understatement of income;              
          (2) inadequate records; (3) failure to file tax returns;                    
          (4) implausible or inconsistent explanations of behavior;                   
          (5) concealing assets; and (6) failure to cooperate with tax                
          authorities.  Spies v. United States, 317 U.S. 492, 499 (1943);             
          Bradford v. Commissioner, 796 F.2d 303, 307 (9th Cir. 1986),                
          affg. T.C. Memo. 1984-601.                                                  
               But we begin with what we think is the most important bit of           
          evidence in support of the Commissioner’s position:  In their               
          criminal plea agreements, Mr. Chen admitted that he conspired to            
          commit fraud and Mrs. Chen admitted to “act[ing] with a specific            
          intent to commit fraud.”  They also both pleaded guilty under               
          section 7206(1) to willfully filing their 1998 income tax return            
          knowing it was false because it did not include the proceeds of             
          their fraud.  (We specifically note, with regard to Mrs. Chen,              
          that the plea agreement has a certificate of accurate translation           
          and that Mrs. Chen did not attack her consent to the plea                   
          agreement.)                                                                 
               It is true that this is not enough for the Commissioner to             
          win on this issue through collateral estoppel--the fraud penalty            
          requires proof of an intent to evade taxes, and we held in Wright           
          v. Commissioner, 84 T.C. 636, 643 (1985), that a conviction under           
          section 7206(1) establishes as a matter of law only an intent to            
          falsify a tax return.  But a conviction for willful falsification           






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