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counsel of a Presidential reelection committee was not liable
for the civil fraud penalty with respect to his unreported
income from illegal activities, notwithstanding the taxpayer’s
education, professional background, and amoral conduct), affd.
808 F.2d 312 (4th Cir. 1986).
Respondent contends that petitioner maintained inadequate
records and that this is circumstantial evidence of fraud.
Although petitioner signed no loan agreements or other documents
to evidence an investment or loan transaction with the Kieffers,
we believe that petitioner’s personal relationship with the
Kieffers and the nature of the purported transactions credibly
explain the absence of formal documents memorializing the
Kieffers’ “investments”.7 Respondent does not allege, and the
evidence does not suggest, that petitioner concealed records
from respondent, refused to cooperate with respondent’s
investigation, made misleading statements to IRS agents during
the course of the IRS investigation, destroyed any records, or
altered any entries in his books.
On the basis of all the evidence in the record, we conclude
that respondent has failed to prove clearly and convincingly
7 Additionally, we are not convinced by respondent’s
argument that petitioner’s failure to maintain adequate records
to substantiate employee business expenses is circumstantial
evidence of fraudulent intent to evade tax, particularly in light
of respondent’s concession that for 1995 petitioner has
substantiated more employee business expenses than he claimed on
his 1995 return.
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Last modified: May 25, 2011