William R.Tinnerman - Page 14

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          The taxpayer's background and the context of the events in                  
          question may be considered as circumstantial evidence of fraud.             
          Spies v. United States, supra at 497; Plunkett v. Commissioner,             
          supra at 303.                                                               
               The instant case involves numerous badges of fraud.                    
          Petitioner is an intelligent and well-educated businessman, who             
          prior to 1999 complied with applicable tax laws.  Petitioner                
          failed to file tax returns or make tax payments in taxable years            
          1999 through 2002.  Petitioner attempted to conceal assets and              
          income in a sham trust.  Petitioner failed to cooperate with                
          reasonable requests for documents.  We conclude that the record             
          shows by clear and convincing evidence that petitioner                      
          understated his income and that there are sufficient badges of              
          fraud to show that petitioner fraudulently intended to understate           
          his income.  We therefore hold that petitioner is liable for the            
          fraud penalty pursuant to section 6651(f) for taxable years 1999,           
          2000, and 2001.                                                             
               Pursuant to section 7491(c), respondent bears the burden of            
          production with respect to the additions to tax under sections              
          6651(a)(1), 6651(a)(2), and 6654.  Consequently, respondent must            
          produce sufficient evidence to demonstrate that the addition to             
          tax is appropriate. See Higbee v. Commissioner, 116 T.C. 438, 446           









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