Frank H. and Marla C. Black - Page 25
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intent to mislead which may be inferred from a pattern of
conduct, and lack of credibility of the taxpayer’s testimony.
Spies v. United States, supra at 499. 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; Bradford v. Commissioner, 796 F.2d 303, 307 (9th Cir.
1986), affg. T.C. Memo. 1984-601; Niedringhaus v. Commissioner,
99 T.C. 202, 211 (1992).
The instant case involves numerous badges of fraud. Mr.
Black grossly understated his income. The 1991 and 1992 joint
returns reported negative taxable income of $49,538 and $11,981,
respectively. Even after respondent’s minor concessions at
trial, petitioners failed to report substantial amounts of
income, including commissions from Clark Capital of $21,843.36.
Petitioners argue that their omission was an oversight on their
part because Mr. Black did not receive a Form 1099 from Clark
Capital. However, Mr. Black testified at trial that he
maintained records of his business gross receipts, that he knew
he had received the Clark Capital commissions, and that he had
recorded the commission checks in his records. Mr. Black failed
to provide such records to his return preparer.
Petitioners’ standard of living was inconsistent with the
negative income reported on the 1991 and 1992 joint returns.
Petitioners hired a housekeeper and paid for their daughter’s
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Last modified: March 27, 2008