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phony offset of $50,000 against the gross receipts of Wright &
Associates on Form 1120S for 1999. Further, for all of the years
in issue, petitioners used an offshore credit card to make
personal expenditures in order to continue to conceal the $54,000
in unreported income.
For taxable years 1999, 2000, and 2001, Mr. Wright
understated petitioners’ income by failing to include
distributions petitioners received from Wright & Associates,
which the Court concludes is fraudulent in and of itself. Mr.
Wright also maintained inadequate records for all of the years in
issue. Additionally, Mr. Wright failed to make estimated tax
payments for all of the years in issue.
The Court concludes that respondent has proved by clear and
convincing evidence the second prong of the fraud test for 1999,
2000, and 2001. Respondent has shown that at least some part of
the underpayment for all of the years in issue is attributable to
fraud. Specifically, respondent has shown that petitioners
understated their income for all of the years in issue because
they fraudulently failed to include in their income distributions
from Wright & Associates. Respondent has also shown that
petitioners concealed their unreported income by utilizing an
offshore credit card for personal expenditures. The Court
concludes that Mr. Wright’s entire course of conduct relating to
petitioners’ offshore bank account and credit card is indicative
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