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and their improper deductions of personal expenses on the
company’s accounts during the years in issue resulted in
substantial underpayments of tax for those years.
The evidence in this case also establishes the existence of
several “badges of fraud” in petitioners’ personal and business
transactions. Petitioners consistently failed to report taxable
income during the years in issue, most notably from checks that
were cashed by Mrs. Haney and never recorded in the company’s
official books. Petitioner’s solely owned corporation
established and followed a policy of keeping complete and
accurate computerized records for insurance transactions that
would certainly be reported to the IRS by the insurance
companies, but kept only a handwritten list on a notepad of other
checks to the company and did not include the cashed checks as
income to the company during the years in issue. The practice of
keeping a double set of books in this fashion indicates
petitioners’ fraudulent intent to evade tax liabilities with
regard to the income from checks that were cashed.
Petitioners’ practice of consistently charging personal
items to business expense accounts of Flair Enterprises and Flair
Racing is additional evidence of fraudulent intent with regard to
their income tax liabilities. Personal expenses of petitioners
that were charged as business expenses include the downpayment
and closing costs of petitioners’ purchase of the 80-acre tract
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Last modified: November 10, 2007