T.C. Memo. 1995-462
UNITED STATES TAX COURT
LESLIE R. BARTH, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 11610-91. Filed September 27, 1995.
Leslie R. Barth, pro se.
Elise Frost Alair, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
COHEN, Judge: In a statutory notice sent March 7, 1991, to
Leslie R. Barth (petitioner) and Terry E. Barth (Ms. Barth),
respondent determined deficiencies and additions to tax as
follows:
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Additions to Tax
Year Deficiency Sec. 6653(b)
1976 $136,503 $68,252
1978 109,645 55,317
1979 173,243 86,622
1980 191,834 95,917
In a separate statutory notice sent March 7, 1991, to petitioner,
respondent determined a deficiency of $152,448 in petitioner's
Federal income taxes and additions to tax of $76,244 under
section 6653(b) and $5,425 under section 6654 for 1977. Unless
otherwise indicated, all section references are to the Internal
Revenue Code in effect for the years in issue, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
Petitioner and Ms. Barth filed separate petitions. Her case
was docketed as No. 11150-91. After a consolidated trial,
respondent entered into a stipulated decision with Ms. Barth in
which it was agreed that there are no deficiencies in or
additions to tax due from her. The issue remaining for decision
is whether petitioner is liable for the additions to tax for
fraud. The deficiencies and the addition to tax under section
6654 determined by respondent are decided against petitioner by
reason of his failure properly to prosecute this case; the
reasons for that action are discussed below.
FINDINGS OF FACT
Some of the facts have been stipulated, and the stipulated
facts are incorporated in our findings by this reference.
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Petitioner resided at the Federal Correctional Institute in
Danbury, Connecticut, at the time that his petition was filed.
Petitioner graduated from the Wharton Business School at the
University of Pennsylvania in 1957 and from Harvard Law School in
1960. Between 1960 and 1964, petitioner was employed by the
office of Tax Legislative Counsel, U.S. Department of the
Treasury; served with Army Intelligence; and was employed by the
accounting firm of Touche, Ross & Co. In 1964, petitioner
commenced the private practice of law in a partnership that later
became a professional corporation (Bergman & Barth). Bergman &
Barth specialized in tax matters, estate planning, pensions, and
corporate planning. Petitioner was the managing partner and
prepared the tax returns for Bergman & Barth. (He was admitted
to the U.S. Tax Court bar May 5, 1970.)
An agreement dated July 29, 1976, under which Bergman &
Barth bought petitioner's shares in that firm included the
following terms:
2. Buyer agrees to pay Barth [petitioner] for
said shares of capital stock the principal sum of One
Hundred Thousand ($100,000.00) Dollars in manner and
form as follows:
a. One Hundred Thousand ($100,000.00)
Dollars thereof at the Closing hereinafter described in
manner and form as set forth in Schedule A attached.
3. Buyer agrees to pay Barth deferred
compensation in the amount of Two Hundred Fifty-one
Thousand One Hundred Twenty Dollars and Forty-nine
Cents ($251,120.49) and Barth agrees that he will
report said sum as earned income when paid on his
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proper income tax return and the Buyer agrees it will
issue a timely form 1099. Such amount shall be paid in
manner and form as follows:
a. Two Hundred Fifty-one Thousand One
Hundred Twenty Dollars and Forty-nine Cents
($251,120.49) thereof at the Closing hereinafter
described in manner and form as set forth in Schedule B
attached.
During 1976, petitioner received checks totaling $351,150.19 from
Bergman & Barth.
On or about March 1, 1976, petitioner began to practice law
under the name Leslie R. Barth, Associates, P.C. (the law firm).
Petitioner was the sole owner of the law firm, although the name
was changed on or about June 1, 1978, to Barth & Richheimer, P.C.
During each of the years in issue, petitioner provided clients
with legal advice on Federal income tax matters.
During the years in issue, petitioner conducted business
through a variety of corporations and other entities controlled
by him. The law firm and other entities controlled by petitioner
issued checks to petitioner, to Ms. Barth, and to other entities
or accounts controlled by petitioner in the following amounts:
Year Amount
1976 $207,924.71
1977 258,696.39
1978 181,358.00
1979 403,443.61
1980 331,964.57
Funds withdrawn by petitioner from the various accounts were used
for personal purposes during the years in issue.
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During the years in issue, petitioner maintained a home in
Fairfield, Connecticut, that had 16 rooms and was situated on
10.6 acres of land. Petitioner acquired a collection of
automobiles. As of 1979, petitioner maintained at his residence
in Connecticut no fewer than 10 automobiles, including a 1979
Rolls Royce, a 1977 Jaguar, two 1972 Ferraris, and 5 Mercedes
ranging from the 1971 model to a 1979 model. Petitioner
registered a 1975 Pontiac in his name, but all of the other
automobiles were registered in the name of International
Automobiles, Ltd., an entity that purported to be a business
conducted by petitioner or by petitioner and Ms. Barth as
partners, but which conducted little or no actual business
activity.
During the years in issue, petitioner submitted financial
statements to various institutions. On financial statements
dated September 29, 1977, October 10, 1978, and April 19, 1979,
petitioner represented that his compensation from his law firm
was $225,000. On two financial statements dated September 19,
1980, he represented that his compensation from the law firm was
$250,000. In March 1980, petitioner signed a Form 1120S, U.S.
Small Business Corporation Income Tax Return, for his law firm.
That return showed petitioner's compensation as $700,000.
Petitioner, however, did not file that return.
Petitioner did not file timely Federal income tax returns
for the years in issue for himself, for the law firm, or for
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other entities with which he was involved. On July 9, 1980, he
filed an individual joint return for 1976. Petitioner did not
file a Federal income tax return for 1977. No later than 1982,
the Internal Revenue Service (IRS) commenced an investigation of
petitioner. On April 3, 1986, petitioner pleaded guilty to
failure to file his personal income tax return for 1979 in
violation of section 7203. On May 19, 1986, he filed individual
joint returns for 1978, 1979, and 1980 in order to receive
favorable consideration at the time of sentencing on his
conviction.
In late 1979 or early 1980, attorneys for petitioner
employed William Lipton (Lipton), who was then a partner at the
accounting firm of Ernst & Whinney, to prepare petitioner's
Federal tax returns for 1978, 1979, and 1980. For approximately
3 years, Lipton attempted to reconstruct for petitioner books and
records in order to prepare returns. The records, however, were
in terrible shape, consisting of nothing but check stubs and
canceled checks. Brian Onofrio (Onofrio), an employee of
petitioner, also attempted to reconstruct petitioner's records in
order to prepare tax returns for the years in issue. Richard
Timbie (Timbie) was one of several lawyers representing
petitioner in relation to his failure to file returns.
Petitioner's return filed for 1976 reported adjusted gross
income of $4,315.86. He claimed a loss from the law firm as a
subchapter S loss and did not report the income received from
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Bergman & Barth. Petitioner's returns for 1978, 1979, and 1980
reported adjusted gross income of $69,434, $21,773, and $126,685,
respectively. Attached to each return, on the advice of Timbie,
was a statement that the income reported on the return did not
include amounts "withdrawn by the taxpayer from this law firm and
other related entities. Those withdrawals were contemporaneously
recorded as loans and were repaid by the taxpayer in the taxable
year or in subsequent years." The amounts thus excluded from
taxable income reported on the returns were $174,300 for 1978,
$282,900 for 1979, and $83,600 for 1980.
No loan documents were ever prepared or executed by
petitioner. The amounts claimed to be loans were reconstructed
from notes on check stubs, and no records showing actual
repayments were maintained. On the financial statements that he
submitted during the years in issue, as set forth above,
petitioner did not disclose any loans due to the law firm or his
other entities.
After examination of the returns belatedly filed by
petitioner, respondent determined that petitioner had additional
compensation, interest, and other income for the years in issue.
For 1976, respondent determined that no election was filed to
qualify the law firm as an S corporation and that it had not been
established that any deductible loss was sustained. The net
adjustments determined by respondent increased petitioner's
income by $306,673 for 1976, $226,905 for 1978, $396,008 for
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1979, and $327,194 for 1980. Respondent also determined that
petitioner had unreported taxable income of $238,640 for 1977.
From 1991 through 1995, petitioner failed to provide to
respondent any indication that these amounts were incorrect.
OPINION
Before discussing our conclusions with respect to fraud, we
set forth the lengthy procedural history of this case. That
history explains in part why we conclude that petitioner's
representations are not credible and why we determine the
deficiencies in issue against him by reason of his defaults.
Procedural History
In his petition filed June 10, 1991, petitioner alleged that
all of respondent's determinations were in error. As the facts
upon which he relied, he alleged:
(A) At the present time, due to my incarceration
at the Federal Correctional Institute Danbury,
Route 37, Pembroke Station, Danbury, CT 06811, it is
impossible for me to allege facts in support of my
assignments of error as the necessary records and
documents are not available to me. Upon my release, I
will prepare an amended petition in order to comply
with the Court's Rules.
Petitioner designated New York, New York, as the place of trial
for this case.
Petitioner never sought leave to file an amended petition.
In the answer, respondent alleged, in support of the
determination that the underpayments of tax for the years in
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issue were due to fraud, facts concerning petitioner's education
and employment; his failure to file timely returns; the omission
of substantial amounts of income on the returns that were
belatedly filed; and his failure to maintain, or to submit for
examination, complete and adequate books and records. Petitioner
belatedly filed a reply, denying the allegations but not setting
forth any specific facts contradicting them.
By notice served August 28, 1992, this case was set for
trial in New York on February 1, 1993. On November 10, 1992,
petitioner filed a Motion for Continuance and a Motion to Change
the Place of Trial to Hartford, Connecticut. In the Motion for
Continuance, petitioner represented that he was released from the
Federal Correctional Institute on August 22, 1991, and, since
then, had been attempting to obtain his records to prepare
properly for trial. He also represented that he had been
attempting to accumulate sufficient funds to retain counsel.
Petitioner's motions were granted.
By notice served January 6, 1993, the case was set for trial
on June 7, 1993, in Hartford, Connecticut. On May 13, 1993,
petitioner filed a Motion for Continuance, representing that he
had been indicted by the United States on several counts of mail
fraud, that his mail fraud trial was scheduled to commence on
May 10, 1993, and that he was unable to prepare for trial in this
case during the mail fraud trial. Respondent did not object, and
petitioner's motion was granted.
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By notice served January 5, 1994, this case was set for
trial in Hartford, Connecticut, on June 6, 1994. On April 8,
1994, petitioner filed a Motion for Continuance. Petitioner
represented that he was in the process of seeking to set aside a
guilty verdict entered against him in the mail fraud case and
that, therefore, he could not prepare for trial of this case.
On April 18, 1994, respondent filed a Motion to Compel
Production of Documents, and, on April 25, 1994, respondent filed
a Motion to Compel Responses to Respondent's Interrogatories.
Respondent's Motion to Compel Production of Documents was
granted, and petitioner was ordered to produce the documents on
or before May 6, 1994. Respondent's motion with respect to
interrogatories was granted, and petitioner was ordered to
respond to the interrogatories on or before May 16, 1994. The
motions were set for hearing with respect to sanctions on June 6,
1994.
Meanwhile, on April 28, 1994, Ms. Barth filed a Motion to
Consolidate this case with her case. That motion was granted
May 3, 1994. In a subsequent telephone conference call among the
parties and the Court, the Court indicated that petitioner's
Motion for Continuance would be granted only if he cooperated
with respondent with respect to the stipulation of facts and
responded to the outstanding discovery. Thereafter, Ms. Barth
moved for a severance of the cases, representing that her
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psychological health required that she seek immediate resolution
of the innocent spouse and duress issues that she had raised.
When the cases were called for trial on June 6, 1994,
respondent filed a Motion for Sanctions against petitioner,
reporting on petitioner's failure to comply with the outstanding
Court orders. Ms. Barth's Motion for Severance was denied, and
the cases were set for trial June 13, 1994.
On June 13, 1994, the First Stipulation of Facts was filed.
Trial commenced with respect to the issues raised by Ms. Barth.
Witnesses who testified on June 13 and 14, 1994, included
petitioner, Lipton, and Timbie. On June 14, 1994, petitioner was
directed to answer the interrogatories by September 12, 1994.
The Court advised the parties that the trial would be resumed in
the spring of 1995, probably in New York City, which petitioner
had identified as his then current center of activity. The
parties were directed to file a joint written status report on or
before October 11, 1994, and petitioner's Motion for Continuance
was granted with respect to further trial at a time and date to
be set after the filing of the joint written status report.
On October 14, 1994, a status report was filed by Ms. Barth
and respondent. Respondent reported that petitioner had
responded to the interrogatories but that a further conference
was necessary to draft a second stipulation of facts and to
develop further the cases for trial.
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By Order served November 4, 1994, the cases were set for
trial in New York City on April 3, 1995. The parties were
ordered to submit on or before March 3, 1995, trial memoranda
setting forth a discussion of the issues remaining to be tried
and the legal authorities relied on by the parties, identifying
each witness to be called at trial with a brief summary of the
anticipated testimony of such witness, and other matters. The
Order stated: "Witnesses who are not identified in the trial
memorandum will not be permitted to testify at the trial without
leave of the Court upon sufficient showing of cause." The
requirement of the trial memorandum had been included in the
Standing Pre-Trial Order served with each prior notice of trial,
but petitioner never submitted a trial memorandum.
The Order served November 4, 1994, also required the filing
of a stipulation of facts on or before March 3, 1995. Ms. Barth
and respondent entered into a Second Stipulation of Facts,
attaching a variety of records showing receipt by petitioner of
amounts determined by respondent to be unreported income and
attaching various tax returns filed for entities controlled by
petitioner over a period of time. Petitioner failed to cooperate
with respondent and Ms. Barth's counsel with respect to this
stipulation of facts.
On December 5, 1994, respondent's request for admissions was
filed, reflecting service on petitioner on December 2, 1994.
Petitioner did not respond to the request for admissions.
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In early January 1995, in a telephone conference call among
the parties and the Court and Stephen R. Field (Field), an
attorney for petitioner who had not entered his appearance in
this case, petitioner requested a continuance for the purpose of
employing Field to represent him. The Court advised petitioner
that no continuance would be granted in view of the history of
this case.
The case was called for trial on April 3, 1995, in New York
City. Respondent filed a Motion for Sanctions and a Motion to
Dismiss for Failure Properly to Prosecute. The Second
Stipulation of Facts executed by respondent and Ms. Barth was
filed. Petitioner arrived late and filed a Motion for
Continuance based upon the pendency of an appeal from his mail
fraud conviction. His Motion for Continuance was denied, and the
Court stated that respondent's motions would be granted with
respect to the deficiencies. The Court indicated that the trial
would proceed with respect to the fraud issues and those issues
involving Ms. Barth. The Court advised petitioner that he could
testify but that he could not call any other witnesses because of
his failure to file a trial memorandum or to have present those
witnesses. Petitioner thereafter testified that he would have
called Timbie and Onofrio as witnesses, but he admitted that he
had not taken any steps to produce them for the trial.
Petitioner represented that he intended to employ Field as
his attorney by April 30, 1995, and that he was in consultation
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with Field about his testimony in this case. The Court advised
petitioner that he could move to set aside the defaults
previously declared and that cooperation with respect to the
second stipulation of facts and his testimony might help him in
that regard. Petitioner then indicated that most of the items
set forth in the second stipulation of facts were agreeable. At
no time during his testimony, however, did petitioner show any
error or suggest any specific error in respondent's determination
with respect to the deficiencies.
On April 5, 1995, the case was submitted. Petitioner was
advised that he had until May 5, 1995, to make any motions to be
relieved of his prior defaults, to vacate admissions, or to
strike any exhibits to which a valid evidentiary objection could
be made. The Court stated:
you must include a detailed offer of proof, including
copies of any documents that you would offer in
evidence such as transcripts of prior testimony and a
summary of the anticipated testimony that you or any
other witness could give at any further trial if the
record were reopened.
You're certainly going to have to show good cause,
and I frankly doubt it, because on the basis of the
history so far, I've drawn the inference that you had
never any intention to prosecute this case, but only to
delay it. But if you--I do have to consider any such
motions with regard to the interest of justice, and
you're obviously going to have to offset any prejudice
to the Court, to Respondent and to Mrs. Barth from the
delays and from not resolving it at that point.
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The Court directed that, in the absence of an order granting any
subsequent motions by petitioner, simultaneous opening briefs
were due from the parties July 5, 1995, and answering briefs were
due August 21, 1995.
On May 8, 1995, petitioner filed a Motion for
Reconsideration of Default Judgment and New Trial and Offers of
Proof. Petitioner offered no excuse for his prior failures to
comply with Court Orders or to proceed to trial, had not as of
that time employed counsel, and merely represented that he was
"prepared to contact respondent in the ensuing week to discuss a
possible third stipulation of facts." Petitioner's Offers of
Proof consisted of a statement of his intention to call Timbie,
who would give his opinion that the returns were prepared "in
accordance with the provisions of the applicable Internal Revenue
Code and applicable regulations" and Onofrio, who would testify
that he had access to petitioner's records and would give the
same opinion. Further, according to the offer of proof, the
witnesses would testify that petitioner did not intend to
misstate or misrepresent his income.
Because the proffered testimony of Timbie and Onofrio was
primarily inadmissible opinion, was inconsistent with the
testimony previously given by Timbie and Lipton, and was not
sufficient to comply with the Court's direction, petitioner's
motion for reconsideration was denied May 22, 1995. Petitioner
failed to file the briefs ordered by the Court.
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Discussion
Petitioner has attempted to delay this proceeding
indefinitely, without any indication that he has additional
evidence to present on the merits of the deficiencies. The
documents received in evidence and petitioner's admissions
support respondent's determinations of substantial amounts of
unreported income, refute the contention on petitioner's
belatedly filed returns that cash received by him during the
years in issue constituted loans, and contain no suggestions that
petitioner is entitled to deductions not previously allowed.
During the 5 years from the time that his returns were filed and
the additional 4 years that this case has been pending,
petitioner has failed to specify errors in respondent's
determinations of the amounts of his unreported income. We are
satisfied that no injustice has resulted from our determination
that he is liable for the deficiencies determined by respondent.
During trial, we cited to petitioner, and he acknowledged
familiarity with, our opinion in Brooks v. Commissioner, 82 T.C.
413 (1984), affd. without published opinion 772 F.2d 910 (9th
Cir. 1985). He was thus well aware that his failure to proceed
as ordered by the Court would ultimately lead to resolution of
these issues against him, but he made no attempt to comply.
Respondent's motion to dismiss shall be granted under Rules 123,
142(a), and 149(b). See Brooks v. Commissioner, 82 T.C. at 422-
430, and cases cited therein.
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Petitioner also has the burden of proof with respect to the
addition to tax under section 6654 for 1977. That addition to
tax is mandatory, absent exceptions not shown to exist here.
Grosshandler v. Commissioner, 75 T.C. 1, 20-21 (1980).
Respondent's determination in that regard must also be sustained.
The addition to tax in the case of fraud is a civil sanction
provided primarily as a safeguard for the protection of the
revenue and to reimburse the Government for the heavy expense of
investigation and the loss resulting from the taxpayer's fraud.
Helvering v. Mitchell, 303 U.S. 391, 401 (1938). Respondent has
the burden of proving, by clear and convincing evidence, that
some part of an underpayment for each year was due to fraud.
Sec. 7454(a); Rule 142(b). This burden is met if it is shown
that the taxpayer intended to evade taxes known to be owing by
conduct intended to conceal, mislead, or otherwise prevent the
collection of such taxes. Stoltzfus v. United States, 398 F.2d
1002, 1004 (3d Cir. 1968); Webb v. Commissioner, 394 F.2d 366,
377 (5th Cir. 1968), affg. T.C. Memo. 1966-81.
The existence of fraud is a question of fact to be resolved
upon consideration of the entire record. Gajewski v.
Commissioner, 67 T.C. 181, 199 (1976), affd. without published
opinion 578 F.2d 1383 (8th Cir. 1978). Fraud will never be
presumed. Beaver v. Commissioner, 55 T.C. 85, 92 (1970). Fraud
may, however, be proved by circumstantial evidence because direct
proof of the taxpayer's intent is rarely available. The
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taxpayer's entire course of conduct may establish the requisite
fraudulent intent. Stone v. Commissioner, 56 T.C. 213, 223-224
(1971); Otsuki v. Commissioner, 53 T.C. 96, 105-106 (1969).
The failure to file tax returns, without more, is not
conclusive proof of fraud; such omission may be consistent with a
state of mind other than the intention and expectation of
defeating the payment of taxes. Stoltzfus v. United States,
supra; Cirillo v. Commissioner, 314 F.2d 478, 482 (3d Cir. 1963),
affg. in part and revg. in part T.C. Memo. 1961-192; Kotmair v.
Commissioner, 86 T.C. 1253 (1986). Failure to file, however, may
be considered in connection with other facts in determining
whether an underpayment of tax is due to fraud.
Petitioner's return for 1976 was filed 3 years late. He did
not file a return for 1977. His returns for 1978, 1979, and 1980
were filed only after he was investigated by the IRS and in
relation to sentencing on his conviction under section 7203.
Because petitioner failed to maintain complete and accurate
records, his representatives could not prepare accurate returns.
Petitioner's training and experience and knowledge of the proper
way to keep books and records and report taxable income must be
considered. Under these circumstances, we infer that the failure
to file returns and the failure to maintain records were intended
to conceal his income and avoid payment of taxes. See Scallen v.
Commissioner, 877 F.2d 1364, 1370-1371 (8th Cir. 1989), affg.
T.C. Memo. 1987-412; O'Connor v. Commissioner, 412 F.2d 304, 310
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(2d Cir. 1969), affg. on this issue and revg. T.C. Memo. 1967-
174; Grosshandler v. Commissioner, supra at 19-20.
Petitioner's asserted during his testimony that he relied on
Lipton, Onofrio, and Timbie to prepare his tax returns. With
respect to the purported loans, he testified:
a significant portion of the proceeds that I received
from the Bergman & Barth firm, which, in the aggregate,
deferred compensation and capital gains, et cetera,
aggregated close to $400,000, to the best of my
knowledge, was rerouted, in other words, through the PC
and other entities.
In other words, loans were made by myself
individually to the PC and to the other related
entities from the proceeds that I realized on the
Bergman & Barth sale. So that obviously if one were
dealing with just the checks that were written to me,
number one, they don't reflect rather significant
loans, which I believe at least a significant part of
the interest has been checked and allowed by the IRS.
And, also, as I say, it doesn't reflect the good
part of the $400,000 that got rerouted, in other words,
through those accounts. So it was those analysis, in
other words, that I went through with Mr. Timbie and
with Mr. Onofrio, in other words, to present the
clearest picture. And the main point of focus that
Mr. Timbie had with respect to the loans and I think
which lead to the statements being attached to the
returns was the issue in subsequent years, years
subsequent to 1980.
What happened was--let me take that back. What
happened is in the early years, there was a credit
balance running from the entities to me. In other
words, I lent them more money than they lent me and
they were repaying it. There was a time when it ran
the other way, in other words, where I owed them and
the matter ultimately was repaid in years subsequent to
1980. The repayment years were primarily, I believe,
1984 and 1985.
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So that at the time that the statement was made, I
think--I don't recall the exact words, but it was
indicated that amounts were advanced, in other words,
which were repaid during the current year or in
subsequent years.
This testimony does not in any way exonerate petitioner.
"Rerouting" funds received from Bergman & Barth would not make
them nontaxable. To the contrary, petitioner's "rerouting"
transactions, in the context of the entire record of how he used
multiple entities and devices to minimize or avoid taxes, are
evidence of an intent to conceal income. Petitioner's prior
admissions of income from the firm of at least $225,000 for each
of the years in issue, made on various financial statements,
belie the later claims that he received only loans and no
significant taxable income from the firm. From petitioner's
statement that he "went through" the analysis with Timbie and
Onofrio, we infer that they simply accepted petitioner's
representations that certain amounts were loans.
In this case, petitioner cannot hide behind his employment
of others belatedly to prepare his returns. He did not provide
accurate, complete, or comprehensible records to the persons that
he employed to prepare the returns. See Scallen v. Commissioner,
supra at 1371; Foster v. Commissioner, 391 F.2d 727 (4th Cir.
1968), affg. in part and revg. in part T.C. Memo. 1965-246;
Estate of Temple v. Commissioner, 67 T.C. 143, 162 (1976).
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Moreover, by the time the returns were filed, the fraudulent acts
and omissions had already occurred.
In assessing petitioner's offer of proof, we have considered
the testimony of Lipton and Timbie given in June 1994 in relation
to Ms. Barth's innocent spouse claim. Petitioner was present and
objected to questions to Timbie concerning the records that he
had examined. After those objections were overruled, Timbie
testified that he worked primarily from schedules prepared by
Lipton and Onofrio and recommended the statements attached to the
tax returns with respect to alleged loans. Timbie did not see
any loan documents. Although Onofrio testified during criminal
proceedings against petitioner, and petitioner was advised on
April 4, 1995, to submit Onofrio's prior testimony as part of his
offer of proof, petitioner failed to do so.
The record is replete with clear and convincing evidence
that petitioner underpaid his tax in each of the years in issue,
and those underpayments are due to fraud.
On consideration of the entire record,
Respondent's motion to dismiss
for lack of prosecution will be
granted, and decision will be
entered for respondent.