MEMORANDUM FINDINGS OF FACT AND OPINION
WRIGHT, Judge: By notice of deficiency dated July 13, 1982, respondent determined the following deficiencies and additions to tax due from petitioner:
| | Additions to Tax |
| Year | Deficiency | Sec. 6653(b) 1 |
| 1970 | $94,276.94 | $47,138.47 |
| 1971 | 20,115.00 | 10,057.50 |
After a concession, the issues for decision are: (1) whether respondent has properly determined deficiencies in petitioner's Federal income tax for each of the taxable years in issue; and (2) whether petitioner is collaterally estopped from denying the applicability of the addition to tax for fraud under section 6653(b) for the taxable year 1970. 2
FINDINGS OF FACT
Some of the facts have been stipulated and are so found. The stipulation of facts and exhibits attached thereto are incorporated herein by this reference.
Petitioner Louis Astuto (petitioner) resided in Staten Island, New York, at the time the petition in this case was filed. Petitioner did not file income tax returns for 1970 or 1971. 3
On April 13, 1977, petitioner was indicted by a Federal grand jury on four counts of Federal income tax evasion, specifically for willfully and knowingly attempting to evade taxes due, and for failure to file income tax returns for the 1970 and 1971 taxable years. 4 After a trial before a jury, petitioner was found guilty under Counts One and Two of violating sections 7201 and 7203 for the taxable year 1970. 5United States of America v. Louis Astuto (E.D.N.Y. Docket No. 77-CR-220), affd. without opinion 615 F.2d 1351 (2d Cir. 1979).
In the statutory notice of deficiency, respondent determined deficiencies and additions to tax for fraud in petitioner's income tax for the 1970 and 1971 taxable years. Respondent alleged in his answer that during the taxable years in issue petitioner acquired stolen securities which he turned over to Edmund Graifer, who pledged the securities for loans from The Trust Company of New Jersey and then shared the loan proceeds with petitioner. Based in part on the testimony and evidence of record from petitioner's criminal trial, respondent calculated that petitioner had unreported income from the stolen securities scheme as follows:
| | | Amount Received |
| Date of Loan | Securities Pledged | Amount of Loan | by Petitioner |
| 4-2-70 | $50,000 State of | $62,500 | $25,000 |
| Michigan Bonds |
| $30,000 Port |
| Authority Bonds |
| $50,000 San Francisco |
| Bay Area Bonds |
| 5-1-70 | $100,000 U.S. | $75,000 | $30,000 |
| Treasury Bills |
| 5-19-70 | 3,000 Shares ITT | $70,000 | $25,000 |
| 7-19-70 | 700 Shares | $70,000 | $30,750 |
| Emerson Electric |
| 500 Shares Portland |
| Cement |
| 500 Shares ITT |
| 400 Shares Walt |
| Disney Productions |
| 11-10-70 | $100,000 U.S. | $75,000 | $30,000 |
| Treasury Bills |
| 12-8-70 | $50,000 State of | $30,000 | $15,000 |
| Ohio Bonds |
| TOTAL RECEIVED BY PETITIONER IN 1970 | $155,750 |
| 12-23-70 | 11,500 Shares | $75,000 |
| Iowa Power & Light |
| 12-31-70 | 11,550 Shares | $40,000 |
| Iowa Power & Light |
| 1-4-71 | 11,500 Shares | $50,000 | $50,000 |
| Iowa Power & Light |
| TOTAL RECEIVED BY PETITIONER IN 1971 | $50,000 |
After numerous continuances, this case was calendared for trial on January 28, 1985, at a special session of the Court in Washington, D.C. However, no oral testimony was given at trial. The evidence in this case consists of a stipulation of facts with accompanying exhibits. 6 These exhibits include the trial transcripts from petitioner's criminal trial for tax evasion, except for the testimony of Edmund Graifer (Mr. Graifer) and Salvatore Cardinale (Mr. Cardinale), the two principal witnesses for the Government in that prior proceeding.
At the trial session before this Court, petitioner attempted to call Mr. Graifer and Mr. Cardinale as witnesses to testify in this case. Both individuals had previously participated in the Government's witness protection program. Mr. Cardinale was subpoenaed but the United States Marshal's Service was unable to locate him for service of the subpoena. With respect to Mr. Graifer, the United States Marshal's Service, in response to this Court's issuance of a bench warrant, provided the Court with medical documentation that Mr. Graifer's physical condition prevented him from traveling.
OPINION
The Commissioner's determination of a deficiency in tax is presumptively correct and petitioner bears the burden of proving it wrong. Rule 142(a); Welch v. Helvering,290 U.S. 111, 115 (1933); Bernuth v. Commissioner,470 F.2d 710, 714 (2d Cir. 1972), affg. 57 T.C. 225 (1971). Where, however, it is demonstrated that the statutory notice of deficiency is arbitrary and excessive, the presumption of correctness evaporates and the burden of going forward with evidence supporting the determination of deficiency shifts to respondent.7Helvering v. Taylor,293 U.S. 507 (1935);Dellacroce v. Commissioner,83 T.C. 269, 280, 287 (1984).
In his petition, petitioner alleges that the notice of deficiency was based on the criminal conviction against him and further states that the judgment of conviction does not establish that he ever dealt in stolen securities or had income in the amount determined by respondent. Petitioner denies receipt of income as set forth in the notice of deficiency. In addition, petitioner claims he was denied procedural due process because he was never audited or given the opportunity to have a hearing before the Internal Revenue Service.
On brief, petitioner argues that the conviction against him was based entirely on the testimony of Mr. Graifer. Petitioner's principal contention, therefore, is that the doctrine of collateral estoppel should not apply in this case because this witness was unavailable for cross-examination at trial in the instant case. According to petitioner, Mr. Graifer testified at the criminal trial that he had an illegal arrangement with petitioner wherein petitioner furnished Mr. Graifer with stolen securities which were used as collateral for loans, and that loan proceeds were then shared with petitioner. Petitioner contends that Mr. Graifer, a Government informant who was granted immunity, lied in order to protect himself from prosecution during petitioner's 1978 trial. Petitioner claims that given the opportunity Mr. Graifer might now "purge himself of his untruthful testimony." In allegations which accuse the Government of refusing to produce Mr. Graifer as a witness, petitioner states that he has been thwarted in his attempt to prove that Mr. Graifer never gave him any money and that he had no taxable income during the years at issue.
We find that petitioner has failed to offer any evidence casting doubt on the deficiency determined by respondent. First, petitioner's contentions concerning the applicability of collateral estoppel are not well taken. We note that collateral estoppel is relevant where respondent has determined additions to tax for fraud based on a conviction for criminal tax evasion under section 7201. As discussed infra, it is an established policy of this Court to sustain respondent's determination of additions to tax where a taxpayer has been found guilty under section 7201. In such circumstances the doctrine of collateral estoppel actually and necessarily determines that there was, for purposes of section 6653(b), a specific intention to evade tax, but does not prevent a taxpayer from presenting reliable and credible evidence to show that respondent's determination of deficiency is incorrect. See Arctic Ice Cream Co. v. Commissioner,43 T.C. 68, 74 (1964). In the instant proceeding, petitioner's arguments do not constitute reliable and credible evidence sufficient to shift the burden of going forward with the evidence to respondent. Thus, petitioner's assertion that collateral estoppel is not applicable is irrelevant. Moreover, petitioner's contentions concerning Mr. Graifer's prior testimony, which was not placed in the record in this case, are purely speculative.
Secondly, petitioner's assertion that Mr. Graifer is the only "witness in existence" to prove that he did not receive the income at issue is fallacious. Petitioner had the opportunity to testify at trial before this Court. If petitioner had in fact testified and if such testimony was determined to be credible, this might have been sufficient to shift the burden of going forward to respondent. 8 This Court has noted on several occasions, however, that a taxpayer's unexplained failure to testify gives rise to a presumption that had he testified and told the truth, his testimony would have been unfavorable to his cause. Kraus v. Commissioner,59 T.C. 681, 696 (1973), affd. without discussion on this point 490 F.2d 898 (2d Cir. 1974); Cohen v. Commissioner,9 T.C. 1156, 1162 (1947), affd. 176 F.2d 394 (10th Cir. 1949); Wichita Terminal Elevator Co. v. Commissioner,6 T.C. 1158 (1946), affd. 162 F.2d 513 (10th Cir. 1947). Because petitioner herein did not testify it can be inferred that his testimony would have been unfavorable to his case.
In addition, petitioner's allegations that the Government prevented Mr. Graifer and Mr. Cardinale from testifying are not established. The record indicates that throughout the course of this proceeding, counsel for both respondent and petitioner were dilatory in preparing this case for timely disposition. After numerous continuances, this Court attempted, through the issuance of a bench warrant, to bring Mr. Graifer before the Court to testify. Despite this Court's good faith effort to ensure Mr. Graifer's presence at trial, the United States Marshal's Service provided the Court with medical documentation indicating that he was an unavailable witness due to his ill health. As noted in the record, Mr. Cardinale was also subpoenaed, but apparently avoided service. The reasons for the unavailability of these two witnesses were fully disclosed at trial on January 28, 1985.
We therefore conclude that, in the absence of any evidence to the contrary, respondent's determination with respect to the deficiencies must be sustained.
The final issue for our consideration is whether petitioner is collaterally estopped from denying the applicability of an addition to tax under section 6653(b) for the taxable year 1970. Generally, the burden of proving fraud is on respondent. Sec. 7454(a); Rule 142(b). However, where a taxpayer has been indicted and found guilty of violating section 7201, it is well established that the taxpayer is collaterally estopped from denying the allegations of fraud. Rodney v. Commissioner,53 T.C. 287 (1969); Amos v. Commissioner,43 T.C. 50 (1964), affd. 360 F.2d 358 (4th Cir. 1965); Arctic Ice Cream Co. v. Commissioner,supra.As this Court noted in Arctic Ice Cream Co. v. Commissioner,supra at 76, "[t]he essence of estoppel by judgment is that there has been a judicial determination of a fact, and the question always is, has there been such a determination and not upon what evidence or by what means it was reached." Further, the fact that certain witnesses were unavailable for examination at trial before this Court does not bar respondent from relying on the doctrine of collateral estoppel to establish fraud.
Petitioner in this case was indicted and found guilty of willfully attempting to evade and defeat his income tax under section 7201 for the taxable year 1970. His conviction was affirmed by the United States Court of Appeals for the Second Circuit and that judgment is now final. Accordingly, petitioner is estopped from denying fraud for the taxable year 1970 and we further conclude that petitioner is liable for the addition to tax under section 6653(b) for that year.
To reflect the foregoing,
Decision will be entered for the respondent.