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company petty cash fund during the embezzlement investigation,
but now allege, as discussed earlier, that Steelman maintained a
petty cash fund, into which all the cash from the cashed checks
was placed, and that Steelman took that money with her when she
left. Petitioners developed this argument only when faced with
substantial income tax deficiencies related to the unreported
income represented by the cashed checks. The belated,
inconsistent, and implausible representations made by petitioners
are evidence of petitioners’ fraudulent intent.
Mrs. Haney regularly cashed checks from noninsurance
customers and business associates but deposited checks from
insurance customers. We are convinced that this pattern was a
deliberate scheme to report only the income that was easily
traceable because of reporting requirements applicable to the
payors. We conclude that petitioners’ statements and testimony
regarding the cash transactions and the cash kept on hand by them
personally were false. Petitioners’ last-minute claims that all
cash received by Mrs. Haney at the bank was given to Steelman,
who then stole it, is particularly unconvincing. To the
contrary, we believe that petitioners have fabricated this
argument as a defense to their own wrongdoing in underreporting
income and overstating deductions.
The evidence in this case establishing the fraudulent intent
of each petitioner with regard to their understatements of
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