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under section 7206(1), and a conviction under section 7206(1)
does not establish that the taxpayer had fraudulent intent to
underpay tax even if the sole allegation that the return was
false was that the taxpayer had knowingly omitted a substantial
amount of income. Wright v. Commissioner, supra at 643.7
Respondent contends that petitioner’s failure to report
millions of dollars of income for 2 years is a badge of fraud.
We disagree. Respondent has not shown the amount of petitioner’s
underpayment by clear and convincing evidence. Two years of
conduct is not a pattern for purposes of establishing a badge of
fraud. See Loftin & Woodard, Inc. v. United States, 577 F.2d
1206, 1239 (5th Cir. 1978) (2 years do not “a pattern make”).
b. Convictions Relating to Bank Loans
Respondent contends that testimony by the special agent at
petitioner’s criminal trial clearly and convincingly shows that
petitioner fraudulently intended to evade tax. We disagree.
First, it is well established that conviction under section
7206(1) is not sufficient to establish fraud. See United States
v. Edwards, 777 F.2d at 651; Wright v. Commissioner, supra.
7 We have found taxpayers convicted under sec. 7206(1) not
to be liable for fraud where the sole allegation that the return
was false was that the taxpayer knowingly omitted a substantial
amount of income. See, e.g., Kemp v. Commissioner, T.C. Memo.
2004-153; McGowan v. Commissioner, T.C. Memo. 2004-146;
Wickersham v. Commissioner, T.C. Memo. 1999-276; McCulley v.
Commissioner, T.C. Memo. 1997-285; Cox v. Commissioner, T.C.
Memo. 1985-324; Rinehart v. Commissioner, T.C. Memo. 1983-184.
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