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under section 7206(1) is certainly one of the facts to be
considered in deciding whether the Chens committed tax fraud.
See id. at 643-644; see also Welker v. Commissioner, T.C. Memo.
1997-472. And the Chens’ specific acknowledgment of fraud in the
plea agreements certainly weighs against their claims of
innocence now.
But even without the acknowledgment of fraud and the guilty
plea, the badges of fraud in this case are plain:
! Mr. Chen intentionally submitted a false claim of loss
to Chubb Insurance;
! he concealed receipt of the resulting fraud proceeds
from his tax preparer;
! the Chens’ testimony is replete with contradictory
claims, ranging from Mr. Chen’s claim to know nothing
about the financial aspect of the business--“I really
[am] not too much concern[ed] about the finance[s], you
know, I [am] just a super-sales[man] only”, while later
claiming the opposite--“I am like a dictator in the
company;” to saying that he “never touch[ed] the money
flow and accounting issues * * * [or paid] too much
attention in this issue”, only to testify in answer to
the question “[D]id you tell the accountant what to
do?”, “Yes”; to Mrs. Chen’s testimony both that she
herself deposited the $287,000 into the fake Beam
account and that Ms. He did;2
! implausible explanations--to take one example, Mr. Chen
said he intended to split the insurance proceeds with
Beam’s owner. Yet Mr. Chen never gave him any money,
2 Such inconsistency cannot be chalked up to bad memory or
simple misunderstanding, as the Chens argue. The flip-flops are
too numerous to discount, and the Court made sure that transla-
tors were available at trial to guarantee that the Chens under-
stood the questions being asked.
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