- 54 -
Mr. Richardson was aware of and expressly opposing the challenges
raised by respondent to similar trust arrangements.
Against this backdrop, a number of the traditional “badges”
of fraud should be considered as well. As regards understatement
of income, consistent failure to report substantial amounts of
income over a number of years is highly persuasive evidence of
fraudulent intent. Kurnick v. Commissioner, 232 F.2d 678, 681
(6th Cir. 1956), affg. T.C. Memo. 1955-31; Temple v.
Commissioner, supra. Petitioners reported gross income of less
than $15,000 and taxable income of less than $1,000 on their
Forms 1040 for each 1996, 1997, and 1998. They did so during a
period when Mr. Richardson generated receipts totaling more than
$1.5 million over the 3 years from selling Aegis trusts and
related services. Petitioners avoided reporting those funds by
intentionally diverting such amounts to returns of other entities
that the Court has held to be devoid of economic substance. This
pattern weighs heavily in favor of a conscious intent to evade
tax.
With respect to record maintenance, petitioners at no time
throughout the administrative or litigation process produced
documentary records to substantiate business income or expenses.
Possible inferences are that they either failed to keep such
records or elected to conceal them to further obfuscate their
activities. Neither is favorable to petitioners.
Page: Previous 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 NextLast modified: May 25, 2011