Temple v. Commissioner

2000 T.C. Memo. 337, 80 T.C.M. 611, 2000 Tax Ct. Memo LEXIS 395

• Court: United States Tax Court
• Decided: November 1, 2000
• Docket: No. 23071-96
• Status: Unpublished

Opinion

ROBERT M. TEMPLE, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent

Temple v. Commissioner

No. 23071-96

United States Tax Court

T.C. Memo 2000-337; 2000 Tax Ct. Memo LEXIS 395; 80 T.C.M. (CCH) 611; T.C.M. (RIA) 54104;

November 1, 2000, Filed

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               APPENDIX J

             1992 Gross Receipts

                            Deposited in

   Payor       Amount      Payee        Account No.

   _____       ______      _____        ____________

Educational

 Zoological

 Programs, Inc.    $ 100    Plume Enterprises     400359855

Anheuser-Busch     2,000    Plume Enterprises     400359855

Anheuser-Busch     2,700    Plume Enterprises     400359855

Anheuser-Busch     1,400    Plume Enterprises     400359855

Timothy L. Charles    500    Galingale Group      400359863

Avian Farms        560    Galingale Group      400359863

Avian Farms        350    Galingale Group      400359863

Avian Farms        70    Plume Enterprises     400359855

Anheuser-Busch     1,600    Plume Enterprises     23-043-10

Anheuser-Busch     1,200    Plume Enterprises     23-043-10

Anheuser-Busch     1,200    Plume Enterprises     23-043-10

           ______

 Total        17,880

             1992 Royalty Income

Pennzoil Products   $ 155    Trundle Management

                 Eton Trust Co.,

                 Ltd., Trustee  n1    1163506106

Pennzoil Products    281    Trundle Management

                  Ltd., Trustee      1163506106

Pennzoil Products    257    Trundle Management

                 Ltd., Trustee      1163506106

Pennzoil Products    332    Trundle Management

Pennzoil Products    745    Trundle Management

                 Ltd., Trustee     1163506106

Pennzoil Products    432    Trundle Management

                  Ltd., Trustee     1163506106

Total         2,203

  Total Income n2 20,083

Frank R. Bodor, for petitioner.

Carol A. Szczepanik, for respondent.

Ruwe, Robert P.

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RUWE

MEMORANDUM FINDINGS OF FACT AND OPINION

RUWE, JUDGE: Respondent determined deficiencies and additions to tax in petitioner's Federal income tax as follows:

                   Additions to tax

              ___________________________________

                Sec.      Sec.     Sec.

 Year    Deficiency     6651(f)    6653(b)(1)   6654(a)

 ____    __________    _________    __________  _________

 1988    $ 26,874       N/A     $ 20,156   $ 1,718

 1989     29,683     $ 22,262      N/A     2,006

 1990     25,383      19,037      N/A     1,671

 1991      7,078       5,309      N/A      410

 1992      4,572       3,429      N/A      200

After concessions, ¹ the issues for decision are: (1) Whether petitioner had unreported income from veterinary services, the sale of animals, and oil and gas royalties in the years in issue; (2) whether petitioner is liable for additions to tax for fraud under sections 6653(b)(1) ² and 6651(f); (3) whether petitioner is liable for failure to pay estimated tax under section 6654(a); and (4) whether petitioner is liable for the imposition of a penalty under section 6673 for taking a frivolous and groundless position in these proceedings.

FINDINGS OF FACT

Some of the facts have been stipulated and are so found. At the time the petition was filed, petitioner resided in Bristolville, Ohio.

During the years in issue, petitioner and his wife Catherine Temple (Mrs. Temple) lived at 5955 Stroups Hickox Road, Bristolville, Ohio (5955 property). The 5955 property was a country home with more than 300 acres.

During the years in issue, petitioner was a veterinarian, and he operated a veterinary clinic out of his residence. Petitioner performed services as a veterinarian for several clients including Sea World, ³ Anheuser Busch, the Ohio Department of Wildlife, Canton Veterinary Hospital, Educational Zoological Programs, Inc., Constance A. Halle, Robert M. Sabo, and Wendy Arbogast. Petitioner also provided expert testimony for ITT Hartford.

Petitioner also had property located at 5501 Stroups Hickox Road (5501 property). Petitioner used the 5955 and 5501 properties for livestock breeding. Petitioner bred and sold llamas and birds during the years in issue. Petitioner sold llamas or birds to the following customers: John C. or Maria L. Gifford, Kerney L. and Ann R. Martini, Llamas of Michigan, Swan Lake Llamas, Avian Farms, Ronald G. and Carole L. DeRhodes, Sunny Hill Farms, William L. and Maureen F. Crawford, Fish and Feathers Intl., Ronald C. and Lisa Blider, Educational Zoological Programs, Inc., ⁴ Robert M. Sabo, Dennis Grodings, Jerome T. and Barbara A. Grone, Timothy L. Charles, William J. and Patricia M. Boever, Mary Z. Reed, and Wendy Arbogast.

During the years in issue, petitioner's gross receipts from services provided as a veterinarian and from the sale of animals were as follows:

   Year       Gross Receipts

   ____       ______________

   1988         ¹ $ 47,750

   1989         ²  88,404

   1990         ³  74,360

   1991         ⁴  16,059

   1992         ⁵  17,880

            ____________

    Total         244,453

Approximately half of petitioner's receipts during 1988 were in the form of checks payable to Dr. Temple, while the remaining checks were payable to Plume Enterprises. ⁵ Payments in 1989, 1990, 1991, and 1992 were almost exclusively made to Plume Enterprises, except for one check in the amount of $ 15,500 ⁶ in 1990, ⁷ one check in the amount of $ 600 in 1991, ⁸ and three checks totaling $ 1,410 in 1992. ⁹

With the exception of one check issued in 1989 and seven checks issued in 1992, all checks payable to Plume Enterprises were deposited in an account with Bank One, ¹⁰ account No. 400359855 (Bank One 855 account), held in the name of Plume Enterprises. ¹¹ Oxford Charter Corp. was listed as trustee on Plume Enterprises' Bank One 855 account. L. R. Mayer was the executive director of Oxford Charter Corp. during 1987.

Mrs. Temple had signatory authority over the Bank One 855 account, and the monthly bank statements were sent to petitioner's residence. During the years in issue, Mrs. Temple signed the following checks drawn on Plume Enterprises' Bank One 855 account:

   Year         Payee             Amount

   ____         _____             ______

   1989       Lets Go Travel           $ 240

   1989       Lets Go Travel            480

   1989       Cash                1,000

   1989       R&J Auto Services           404

   1989       DS.BA                 625

   1990       R&J Auto Services           814

   1990       R&J Auto Services           169

   1990       Action Travel             791

   1990       Radisson Resort            497

   1990       Action Travel             158

   1990       Admiral Bendoro            144

   1990       Trundle Management  ¹       2,000

   1990       Trundle Management  ²       1,500

   1990       Trundle Management          500

   1991       Action Travel             278

   1991       Hotel Westcourt            162

   1991        Action Travel             318

   1991       Action Travel             296

   1991       Greenbelt Holiday Inn         67

   1992       Control Management Inc.        400

   1992       Cash                 391

   1992       McMeyers & Ford, Inc.         300

                          _______

    Total                      11,534

The one check issued in 1989 that was not deposited into the Bank One 855 account was deposited in another Bank One account, account No. 400359863 (Bank One 863 account). The Bank One 863 account was held in the name of Galingale Group, Oxford Charter Corp., Trustee. ¹² L. R. Mayer was the executive director of Oxford Charter Corp. during 1987.

Mrs. Temple had signatory authority over the Bank One 863 account, and during the years in issue, she signed the following checks drawn on that account:

   Year         Payee             Amount

   ____         _____             ______

   1988       Lets Go Travel           $ 694

   1988       Bavarian Manor             50

   1988       Custom Parrot Network       10,000

   1988       Bavarian Manor            133

   1988       Sheraton Centre            531

   1988       Custom Parrot Network        3,500

   1988       Trundle Management  ¹       2,000

   1989       The Sheraton Greensboro        512

   1989       DS.BA                1,250

   1989       Lets Go Travel            724

   1989       Regal Travel             138

   1990       Trundle Management  ²       2,000

   1990       Home Centers             281

   1991       Trundle Management  ³       2,000

   1991       Trundle Management  ⁴       2,000

   1991       Cash                 300

   1991       Cash                 500

   1992       Cash                 107

    Total                      26,720

The seven checks issued in 1992 that were not deposited in the Bank One 855 account were deposited in an account with Cortland Savings and Banking Co.¹³ held in the name of Plume Enterprises. These checks totaled $ 8,800, and they were deposited from August to December 1992 in the Cortland Savings account. Neither petitioner nor his wife was listed as having signatory authority over the Cortland Savings account, but monthly bank statements ¹⁴ were sent to their residence, which was also the address listed on the signature card as the account

During 1992, the following checks were drawn on the Plume Enterprises' Cortland Savings account:

   1992       Comfort Suites           $ 164

    1992       L. R. Mayer  ¹            125

   1992       Action Travel             220

   1992       Galt House              386

   1992       Piccolo Co.             1,000

   1992       Control Management, Inc.  ²     400

   1992       McMyers & Ford  ³          300

   1992       Piccolo Co.             5,458

    Total                      8,053

All the above-listed checks were written between September and December 1992. The two largest checks drawn on the Cortland Savings account, one for $ 1,000 and the other for $ 5,458, were payable to Piccolo Co. The check for $ 1,000 was written on October 29, 1992, and the check for $ 5,458 was written on December 31, 1992. Piccolo Co. had an account with Second National Bank of Warren, ¹⁵ account No. 1163353006 (Second National 006 account). ¹⁶

G. Bodor had signatory authority over Piccolo's account with Second National Bank. ¹⁷ During the years in issue, G. Bodor signed the following checks, all of which were drawn on Piccolo Co.'s Second National 006 account:

     Year     Amount      Payee

     ____     ______      _____

     1988    $ 10,000     Purfle Co.

     1988     14,000     Purfle Co.

     1988     10,000     Purfle Co.

     1988     7,630     Purfle Co.

     1989     22,571     Purfle Co.

     1989     5,000     Purfle Co.

     1989     9,597     Purfle Co.

     1990     5,000     Purfle Co.

     1991     4,400     Purfle Co.

     1991     4,479     Purfle Co.

     1992    ¹ 2,000     Purfle Co.

      Total   94,677

The first seven checks listed above, totaling $ 78,798, were deposited into a Dollar Savings and Trust Co. account, account No. 218-000-827 (Dollar Savings 827 account). The Dollar Savings 827 account was held in the name of Purfle Co. with Eton Trust Co., Ltd., as trustee. ¹⁸ Both petitioner and Mrs. Temple had signatory authority over the Dollar Savings 827 account.

Mrs. Temple signed checks payable to cash and drawn on the Dollar Savings 827 account during the years in issue as follows:

     Year       Amount

     ____       ______

     1989      $ 4,000

     1989       4,500

     1989       1,500

     1989       2,000

     1989       2,892

     1989       4,833

     1989       4,000

             ______

      Total     36,725

In addition to the above-listed checks payable to cash, Mrs. Temple withdrew $ 5,000 from the Dollar Savings 827 account in the form of a cashier's check payable to petitioner. Purfle Co. was remitter on another check drawn on a Dollar Savings bank account and payable to petitioner in the amount of $ 5,000.

The last four checks, listed on the previous page, and drawn on the Second National 006 account, totaled $ 15,879. All these checks were deposited into a second bank account with Dollar Savings and Trust Co., account No. 213-593-320 (Dollar Savings 320 account). The Dollar Savings 320 account was held in the name of Purfle Co. with Eaton Trust Co., Ltd., as trustee. ¹⁹ Both petitioner and Mrs. Temple had signatory authority over this account.

Mrs. Temple signed checks payable to cash and drawn on the Dollar Savings 320 account during the years in issue as follows:

     1990      $ 1,500

     1990        500

     1990       2,500

     1991       3,000

     1991       2,000

     1991       1,500

     1991        200

     1992       2,000

     1992       2,500

      Total     20,200

On May 26, 1992, B. L. Holtzhauer replaced petitioner and Mrs. Temple as the person authorized to sign checks on the Dollar Savings 320 account. The following checks payable to cash were signed by B. L. Holtzhauer:

     1992      $ 1,000

     1992       1,000

     1992       2,045

      Total      4,045

On December 7, 1992, the Dollar Savings 320 account was closed, and the proceeds were deposited into Barclays Bank, Nassau, Bahamas.

Prior to February 1985, petitioner was title owner of the 5501 and 5955 properties. On February 28, 1985, petitioner granted his interest in the 5501 and 5955 properties to Black Creek Management Co. with Nassau Life Insurance Co., ²⁰ Ltd., as trustee ²¹ by warranty deeds.

Oil and gas drilling sites were located on both the 5501 and 5955 properties. On February 1, 1985, petitioner executed an Exchange of Royalty Interest with Old Labrador Investment Co. with Nassau Life Insurance Co., Ltd., as trustee. The Exchange of Royalty Interest indicates that petitioner granted Old Labrador Investment Co. with Nassau Life Insurance Co., Ltd., as trustee his interest in the oil and gas leases for both properties for a stated consideration of $ 10. The Exchange of Royalty Interest was recorded in the Trumbull County Recorder's Office on February 28, 1985.

On January 25, 1988, Black Creek Management Co. with Nassau Life Insurance Co., Ltd., as trustee granted by warranty deed for a stated consideration of $ 1 the 5501 and 5955 properties to Trundle Management with Eton Trust Co., Ltd., as trustee ²² by warranty deed. ²³ On the same day, Old Labrador Investment Co. with Nassau Life Insurance Co., Ltd., as trustee, granted for $ 1 in consideration its royalty interest in the oil and gas leases in both properties to Trundle Management with Eton Trust Co., Ltd., as trustee.

Petitioner and his wife continued to reside at the 5955 property. Petitioner continued to use the 5501 and 5955 properties for livestock operations and to operate a veterinary clinic. Petitioner continued to exercise dominion and control over the 5501 and 5955 properties.

Pennzoil Oil and Scavenger Oil paid royalties for use of the oil and gas wells located on both properties during the years in issue. Royalty payments from Pennzoil and Scavenger were as follows:

     Year       Royalty Income

     ____       ______________

     1990        ¹ $ 2,789

     1991        ²   2,199

     1992        ³   2,203

      Total         7,191

With the exception of one deposit, all checks were deposited into an account with the Second National Bank of Warren, account No. 1163506106 (Second National 106 account). The account was held in the name of Trundle Management, Eton Trust Co., Ltd., Trustee. ²⁴ Originally, Mrs. Temple and P. Evans had signature authority over the account. Petitioner's address was listed on the signature card. On July 7, 1992, B. L. Holtzhauer's name was added to the signature card. The address listed as B. L. Holtzhauer's address on the signature card was petitioner's residence. Bank statements were sent to petitioner's residence.

During the years in issue, Mrs. Temple signed checks drawn on the Second National 106 account as follows:

     Year     Amount   Payee

     ____     ______   _____

     1989      $ 500   Cash

     1989       500   Cash

     1989       312   DS.BA

     1990      1,000   Cash

     1990      3,450   Sweda Heating & Cooling

     1990      1,316   R.C. Drywall

            _____

      Total  ¹  7,078

Petitioner was in the process of remodeling and expanding his personal residence in 1989.

Petitioner made a $ 5,000 deposit into the Second National 106 account in 1988. The source of the $ 5,000 deposit was a bank check payable to petitioner drawn from one of the Dollar Savings and Trust accounts.

Petitioner filed Form 1040, U.S. Individual Income Tax Return, for the years 1975 through 1979. Petitioner did not file a Federal income tax return for 1980, and he has not filed a Federal income tax return for any year since 1980.

OPINIONI. UNREPORTED INCOME

Petitioner failed to file Federal income tax returns for the years 1988, 1989, 1990, 1991, and 1992. Respondent determined that petitioner was engaged in the business activity of performing veterinary services and selling livestock during those years. Respondent computed petitioner's business gross receipts based on deposits made to bank accounts which petitioner controlled during those years, taking into account transfers and nontaxable items. Respondent also determined that petitioner received royalty income during the years 1990, 1991, and 1992.

Petitioner does not dispute the existence of the transactions that produced the income that respondent attributes to him. Rather, petitioner argues that the income was received by, and deposited into bank accounts of, valid irrevocable trusts. Petitioner asserts that respondent has improperly imputed gross income received by a trust to petitioner and has improperly failed to recognize the trust as a separate entity. We note, as a preliminary matter, that petitioner did not provide copies of any trust agreements, nor did he or his wife testify at trial.

Section 61(a) provides, in part, that "gross income means all income from whatever source derived, including (but not limited to)" compensation for services, gains derived from dealing in property and royalties. It is fundamental to our system of taxation that income must be taxed to the one who earns it. See Commissioner v. Culbertson, 337 U.S. 733, 739-740, 93 L. Ed. 1659, 69 S. Ct. 1210 (1949); Lucas v. Earl, 281 U.S. 111, 114-115, 74 L. Ed. 731, 50 S. Ct. 241 (1930). Income can be attributed to an individual when the recipient has total control or dominion over the funds and uses the funds for personal purposes. See Davis v. United States, 226 F.2d 331, 334 (6th Cir. 1955); Woods v. Commissioner, T.C. Memo 1989-611, affd. without published opinion 929 F.2d 702 (6th Cir. 1991).

A. VETERINARIAN SERVICES AND THE SALE OF LIVESTOCK

Petitioner provided veterinarian services, and he bred and sold animals. As a result, petitioner received payments by checks totaling $ 47,750 in 1988, ²⁵ $ 88,404 in 1989, ²⁶ $ 74,360 in 1990, ²⁷ $ 16,059 in 1991, ²⁸ and $ 17,880 in 1992. ²⁹ In 1988, checks totaling $ 11,000 were payable to Dr. Temple, while the remaining checks totaling $ 36,750 were payable to Plume Enterprises and deposited into the Bank One 855 account. This account was fashioned as a trustee account, but all funds deposited in the account were based on payments petitioner received for veterinarian services that he provided and from the sale of animals that he sold. Mrs. Temple had signatory authority over the account.

In 1989, petitioner received checks totaling $ 88,404 for the services he provided as a veterinarian and from the sale of animals. Petitioner deposited checks totaling $ 87,804 in the Bank One 855 account, and the remaining check for $ 600 in the Bank One 863 account. Petitioner's spouse, Mrs. Temple, had signatory authority over both accounts.

In 1990, petitioner received checks totaling $ 74,360 for the services he provided as a veterinarian and from the sale of animals. Petitioner deposited checks totaling $ 74,360 into the Bank One 855 account, which Mrs. Temple had signatory authority over.

In 1991, petitioner received checks totaling $ 16,059 for the services he provided as a veterinarian and from the sale of animals. ³⁰ Petitioner deposited checks totaling $ 16,059 into the Bank One 855 account, which Mrs. Temple had signatory authority over.

In 1992, petitioner received checks totaling $ 17,880 for the services he provided as a veterinarian and from the sale of animals. Petitioner deposited checks totaling $ 7,670 in the Bank One 855 account and checks totaling $ 1,410 in the Bank One 863 account. Mrs. Temple had signatory authority over both accounts.

Amounts deposited into the Bank One 855 account in the name of Plume Enterprises and the Bank One 863 account in the name of Galingale Group constituted income of petitioner. Petitioner earned the income, he and his wife exercised total dominion and control over those funds, and they expended the funds for their personal expenses. From these two accounts alone, Mrs. Temple signed checks totaling $ 38,254 ³¹ for personal items, including cash, travel agencies, hotels, auto services and deposits to other accounts over which she had signatory authority.

The remaining payments received by petitioner in 1992, checks totaling $ 8,800, from services he provided as a veterinarian and animals that he sold were deposited into the Cortland Savings account between August and December 1992. Neither petitioner nor his wife was listed as having signatory authority over the Cortland Savings account; however, monthly bank statements were sent to petitioner's residence, and the signature card listed petitioner's address as the account owner's address.

During the period from September to December 1992, checks totaling $ 8,053 were drawn on the Cortland Savings account. A majority of those funds, checks totaling $ 6,458, were deposited in an account with the Second National Bank of Warren. ³² G. Bodor had signatory authority over the Second National 006 account, and during the years in issue she wrote checks totaling $ 94,677 and deposited them into one of two Dollar Savings and Trust accounts. Petitioner and his wife had signatory authority over both Dollar Savings and Trust accounts. We find that the $ 8,800 was earned by petitioner and then funneled through the various accounts as part of petitioner's overall plan to conceal income. Once we view through the layers of nominee accounts through which the funds were channeled, petitioner remained in control of the funds.

B. ROYALTY INCOME

A fundamental principle of income tax law is that economic substance prevails over form. See Gregory v. Helvering, 293 U.S. 465, 79 L. Ed. 596, 55 S. Ct. 266 (1935). "When the form of the transaction has not, in fact, altered any cognizable economic relationships, we will look through that form and apply the tax law according to the substance of the transaction." Zmuda v. Commissioner, 79 T.C. 714, 720 (1982), affd. 731 F.2d 1417 (9th Cir. 1984). This rule applies regardless of whether the entity has a separate existence recognized under State law and whether, in form, it is a trust, a common-law business trust, or some other form of jural entity. See id.

We find the various transactions which purported to result in a transfer of petitioner's interest in the 5501 and 5955 properties and his royalty interest in those properties to be without economic substance. Petitioner always remained in possession of the properties, and he continued to control the properties as he had done before the transfers.

Petitioner and his wife continued to live in their residence located on the 5955 property. Petitioner continued to use the properties for livestock breeding, sale of livestock, and operation of a veterinary clinic. Petitioner, regardless of legal title, exercised dominion and control over the properties.

Payments of $ 7,191 were made for the use of oil and gas wells located on petitioner's properties during the years in issue. With the exception of one check for $ 1,800, payments totaling $ 5,391 were deposited into the Second National 106 account. Mrs. Temple had signatory authority over this account, petitioner's address was listed on the signature card, and bank statements were mailed to petitioner's residence.

Mrs. Temple signed checks totaling $ 2,000 payable to cash in 1989 and 1990 and checks totaling $ 4,766 in 1990 to contractors from this account. Petitioner was in the process of remodeling and expanding his personal residence in 1989.

The one check for $ 1,800 that was not deposited in the Second National 106 account was deposited into the Bank One 855 account. Mrs. Temple signed checks totaling $ 11,534 for personal items including, cash, hotels, several travel agencies, and an automobile service shop drawn on this account.

Petitioner argues that if the income items in appendixes F through J are attributed to him, then respondent has failed to subtract expenses or deductions from petitioner's gross receipts for each year in issue. However, petitioner did not provide any evidence regarding allowable expenses or deductions, and neither petitioner nor his wife testified.

Even in criminal tax evasion cases, where the Government bears the greater burden of proof beyond a reasonable doubt, it is well settled "that evidence of unexplained receipts shifts to the taxpayer the burden of coming forward with evidence as to the amount of offsetting expenses, if any." Siravo v. United States, 377 F.2d 469, 473 (1st Cir. 1967); see also Franklin v. Commissioner, T.C. Memo 1993-184. Where the taxpayer has failed to file a return, or his return shows no receipts from a particular activity, then the assumption that he, more readily than respondent, has access to evidence of deductions or other offsetting amounts makes the nonexistence of such amounts a fair presumption, at least as an initial matter and absent a satisfactory explanation of such nonexistence or the production of some probative evidence. See Franklin v. Commissioner, supra.

We hold that petitioner had unreported taxable income of $ 47,750 in 1988, $ 88,404 in 1989, $ 77,149 in 1990, $ 18,258 in 1991, and $ 20,083 in 1992. See appendixes F through J.

II. ADDITIONS TO TAX FOR FRAUD

The next issue is whether any part of the underpayment of income tax for each year in issue is due to fraud. Respondent's notice of deficiency determined that petitioner is liable for the addition to tax for fraud imposed under section 6653(b)(1) ³³ for the taxable year 1988 and for the addition to tax for fraudulent failure to file under section 6651(f) ³⁴ for the taxable years 1989, 1990, 1991, and 1992. Each section imposes an addition to tax equal to 75 percent of the portion of an underpayment that is attributable to fraud. Because these provisions are analyzed similarly as to the determination of fraudulent intent, we consolidate our discussion of respondent's fraud determinations. See Clayton v. Commissioner, 102 T.C. 632, 653 (1994).

Respondent has the burden of proving by clear and convincing evidence that an underpayment exists for the years in issue and that some portion of the underpayment is due to fraud. See sec. 7454(a); Rule 142(b); Niedringhaus v. Commissioner, 99 T.C. 202, 210 (1992). Consequently, respondent must establish: (1) Petitioner has underpaid his taxes for each year; and (2) some part of the underpayment is due to fraud. See DiLeo v. Commissioner, 96 T.C. 858, 873 (1991), affd. 959 F.2d 16 (2d Cir. 1992). Fraud is the intentional wrongdoing on the part of a taxpayer to evade a tax believed to be owing. See Petzoldt v. Commissioner, 92 T.C. 661, 698 (1989). Where fraud is determined for each of several years, respondent's burden applies separately or each of the years. See Drieborg v. Commissioner, 225 F.2d 216, 219-220 (6th Cir. 1955), affg. in part and revg. in part a Memorandum Opinion of this Court dated Feb. 24, 1954.

A. UNDERPAYMENT OF TAXES

Based on the evidence presented and our previous analysis, we find that respondent has clearly and convincingly established that petitioner understated his taxable income by $ 47,750³⁵ in 1988, $ 88,404 ³⁶ in 1989, $ 77,149 ³⁷ in 1990, $ 18,258 ³⁸ in 1991, and $ 20,083 ³⁹ in 1992. Petitioner underpaid his taxes for each year in issue.

B. FRAUDULENT INTENT

Respondent must prove that a portion of the underpayment is attributable to the fraudulent intent of petitioner. Fraud is the intentional wrongdoing motivated by a specific purpose to evade a tax known or believed to be owing. See Stoltzfus v. United States, 398 F.2d 1002, 1004 (3d Cir. 1968). The existence of fraud is a question of fact to be resolved upon consideration of the entire record. See Gajewski v. Commissioner, 67 T.C. 181, 199 (1976), affd. without published opinion 578 F.2d 1383 (8th Cir. 1978).

Direct proof of a taxpayer's intent is rarely available; thus, fraud may be proven by circumstantial evidence, and reasonable inferences may be drawn from the relevant facts. See Spies v. United States, 317 U.S. 492, 499, 87 L. Ed. 418, 63 S. Ct. 364 (1943); Stephenson v. Commissioner, 79 T.C. 995, 1006 (1982), affd. 748 F.2d 331 (6th Cir. 1984). Any conduct, the likely effect of which would be to mislead or to conceal may establish an affirmative act of evasion. See Spies v. United States, supra at 499.

The courts have relied upon a number of indicia of fraud in deciding whether an underpayment of tax is due to fraud. While no single factor is necessarily sufficient to establish fraud, the existence of several indicia is persuasive circumstantial evidence of fraud. See Petzoldt v. Commissioner, supra.

Respondent argues that the following factors or "badges" of fraud are present in this case: (1) A substantial and consistent understatement of income; (2) extensive dealings in cash; (3) use of nominee accounts; ⁴⁰ (4) failure to cooperate with revenue agents; and (5) petitioner's level of education.

1. SUBSTANTIAL AND CONSISTENT UNDERSTATEMENT OF INCOME

Consistent failure to report substantial amounts of income over a number of years is, standing alone, highly persuasive evidence of fraudulent intent. See Kurnick v. Commissioner, 232 F.2d 678 (6th Cir. 1956), affg. T.C. Memo 1955-31; Reash v. Commissioner, 218 F.2d 954 (6th Cir. 1954), affg. per curiam a Memorandum Opinion of this Court dated Dec. 28, 1953. In this case, there is a substantial and consistent underpayment of tax for each of the years in issue.

2. EXTENSIVE DEALINGS IN CASH

Dealing in cash to avoid scrutiny of one's finances is a badge of fraud. See Bradford v. Commissioner, 796 F.2d 303, 307-308 (9th Cir. 1986), affg. T.C. Memo 1984-601. Petitioner made numerous and substantial cash transactions during the 5 years in issue.

During the years in issue, Mrs. Temple signed checks payable to cash totaling $ 59,223 that were drawn on four different accounts, all of which were fashioned as trust accounts. Mrs. Temple was not a named trustee on any of these accounts. For the short period of time that B. L. Holtzauer replaced petitioner and Mrs. Temple on the Dollar Savings 320 account, checks totaling $ 4,045 were issued payable to cash. The last check issued to cash in the amount of $ 2,045 was used toward the purchase of a bank check for $ 2,645. The Dollar Savings 320 account was closed, and the proceeds deposited into an account in Nassau, Bahamas.

Wendy Arbogast was one of petitioner's clients. Ms. Arbogast testified that she had purchased a bird from petitioner for $ 1,400 but paid $ 800 of the purchase price in cash. Ms. Arbogast testified that petitioner told her when she started going to him for veterinary services that he preferred cash payments.

3. USE OF NOMINEE ACCOUNTS

Use of nominees to conceal assets that a taxpayer has unfettered control over is evidence of fraud. See Friedman v. Commissioner, T.C. Memo 1968-145, affd. 421 F.2d 658 (6th Cir. 1970).

Petitioner received checks from various customers for providing veterinarian services, the sale of animals, and royalties and deposited them into various bank accounts fashioned as trustee accounts. These deposits were derived from income earned by and taxable to petitioner. The accounts were fashioned as trust accounts in an effort by petitioner to disguise the true ownership of the accounts.

4. FAILURE TO COOPERATE WITH REVENUE AGENTS

Failure to cooperate with revenue agents during the audit phase of a case is an additional indication of guilty knowledge on a taxpayer's part. See Professional Servs. v. Commissioner, 79 T.C. 888, 933 (1982).

Revenue Agent Gentile conducted the examination of petitioner for the years in issue. Mr. Gentile testified that as an initial step in his examination of petitioner, he sent petitioner two appointment letters. However, petitioner did not appear at either appointment and did not provide any books or records during the course of the examination.

5. LEVEL OF EDUCATION

A taxpayer's level of education and his prior history of filing proper Federal income tax returns are relevant. See Stephenson v. Commissioner, 79 T.C. 995 (1982).

Petitioner is a doctor of veterinary medicine. A person with his level of education should know that he cannot escape liability from income taxation and still enjoy control and dominion over all the income he received by establishing nominee accounts. Petitioner filed Federal income tax returns for 1975, 1976, 1977, 1978, and 1979. His filing of proper returns for years prior to the years in issue demonstrates that he was aware of his income tax responsibilities.

C. CONCLUSION

The facts and circumstances of this case clearly and convincingly support respondent's determination of fraud for each year in issue.

III. ADDITIONS TO TAX FOR FAILURE TO PAY ESTIMATED TAX

For 1988, 1989, 1990, 1991, and 1992, respondent determined additions to tax for failure to pay estimated tax under section 6654. If there is an underpayment of estimated tax for any of the years in issue, section 6654(a) imposes an addition to tax equal to the interest rate established under section 6621 applied to the amount of the underpayment for the period of the underpayment. This addition to tax is mandatory and, unless one of the exceptions in section 6654(e) applies, is imposed regardless of reasonable cause or extenuating circumstances. See Dodge v. Commissioner, 96 T.C. 172, 183 (1991), affd. on this issue 981 F.2d 350 (8th Cir. 1992); Grosshandler v. Commissioner, 75 T.C. 1, 21 (1980).

The Commissioner's determinations of additions to tax under section 6654 are presumed to be correct, and the taxpayer bears the burden of proving that he is not liable for those additions. See Rule 142(a). Petitioner did not offer any evidence that he paid estimated tax for 1988, 1989, 1990, 1991, and 1992. Accordingly, we sustain respondent's determination.

IV. PENALTY PURSUANT TO SECTION 6673

Under section 6673, this Court may award a penalty to the United States of up to $ 25,000 when the proceeding has been instituted or maintained by the taxpayer primarily for delay or if the taxpayer's position in such proceeding is frivolous or groundless. See sec. 6673. Based on the record, we conclude that such an award is appropriate in this case. Petitioner's argument that he can escape liability for income tax by purporting to assign earnings from his personal activities to a series of trusts is frivolous. Accordingly, a penalty is awarded to the United States under section 6673 in the amount of $ 5,000.

We have considered all arguments in this case. Those arguments not discussed herein are without merit or irrelevant. To reflect the foregoing,

An appropriate order will be issued granting respondent's motion for a penalty, and decision will be entered under Rule 155.

APPENDIX A

1988 Gross Receipts

As Stated in Notice of Deficiency  ¹    Concessions    Total

_____________________________________    ___________    _____

   Payor         Amount

   _____         ______

Sea World of Ohio     $ 500           0      $ 500

Sea World of Ohio      500           0       500

Sea World of Ohio     1,000           0      1,000

Sea World of Ohio     1,500           0      1,500

Swan Lake Llamas      5,750           0      5,750

Society Bank        5,750         ($ 5,750)     0

Bank One           200           (200)     0

Sea World of Ohio     5,000            0      5,000

Jerome T. Grone      2,500           0      2,500

Sunny Hill Farm      1,500           0      1,500

John C. Gifford       100           0       100

Sunny Hill Farm      13,500           0     13,500

Piccolo Company      10,000         (10,000)     0

John C. Gifford      1,100           0      1,100

John C. Gifford      7,300           0      7,300

Custom Parrot

Network          3,500          (3,500)     0

Dollar Bank

Cashier Check      15,000         (15,000)     0

            ______         _________    ______

 Total          82,200         (34,450)    47,750

               APPENDIX B

             1989 Gross Receipts

As Stated in Notice of Deficiency n1   Concessions      Total

_________________________________    ___________      _____

   Payor        Amount

   _____        ______

Llamas of Michigan    $ 2,450         0       $ 2,450

Llamas of Michigan    22,050         0        22,050

Dennis Grodings       900         0         900

Sea World of Ohio     1,500         0        1,500

John C. Gifford      9,500         0        9,500

Sea World of Ohio      105         0         105

John C. Gifford      1,200         0        1,200

Sea World of Ohio     1,500         0         1,500

State of Ohio       3,649         0        3,649

Valley Las Vegas      1,815       ($ 1,815)        0

Ronald G. DeRhodes    22,000         0        22,000

Canton Veterinary

Hospital         5,000         0        5,000

Sea World of Ohio     3,000         0        3,000

Wendy H. Arbogast     1,800         0        1,800

Constance A. Halle      150         0         150

William C. Crawford     200         0         200

William C. Crawford    1,000         0        1,000

Ronald C. Blidar      1,800         0        1,800

Ronald C. Blidar      1,000         0         1,000

John C. Gifford       600         0         600

            ______       _________     _______

 Total          90,219       (1,815)      88,404

               APPENDIX C

             1990 Gross Receipts

As Stated in Notice of Deficiency      Concessions    Total

_________________________________      ___________    _____

John C. Gifford      9,500           0     $ 9,500

 Programs, Inc.       100           0       100

Kerney L. Martini     8,500           0      8,500

Scavenger Oil Corp.    1,800         ($ 1,800)       0

Sea World of Ohio     1,500           0      1,500

Kerney L. Martini      7,500           0      7,500

Intuit             2           0        2

 Programs, Inc.       350           0       350

Sea World of Ohio     1,200           0      1,200

Wendy H. Arbogast      200           0       200

 Programs Inc.       100           0       100

Robert Sabo         145           0       145

Ronald G. DeRhodes     1,200            0      1,200

State of Ohio        728           0       728

Wendy H. Arbogast     1,800           0      1,800

Robert Sabo         135           0       135

Robert Sabo         210           0       210

William Boever      15,500           0      15,500

Robert Sabo          90           0        90

Sea World of Ohio     9,000           0      9,000

 Total        ¹ 76,160         (1,800)    74,360

             1990 Royalty Income

   Payor         Amount       Concessions     Total

   _____         ______       ___________    ______

Scavenger Oil Corp.   ¹ $ 1,800         $ 0      $ 1,800

Pennzoil Products       257          0        257

Pennzoil Products       289          0        289

Pennzoil Products       443          0        443

             ______        _______    _______

 Total           2,789          0       2,789

   Total Income  ²    78,949        (1,800)     77,149

               APPENDIX D

             1991 Gross Receipts

As Stated in Notice of Deficiency   Concessions       Total

_________________________________   ___________       _____

Robert Sabo        $ 600        0         $ 600

Robert Sabo         70        0          70

Robert Sabo         35        0          35

Fish and Feathers

International       250        0          250

Robert Sabo        1,000        0         1,000

Robert Sabo         500        0          500

Bad Film         10,500      ($ 10,500)         0

 Programs Inc.       200        0          200

State of Ohio       1,000        0         1,000

Robert Sabo         123        0          123

Avian Farms        2,750        0          2,750

Mary Z. Reed        500        0          500

Avian Farms         35        0          35

ITT Hartford        595        0          595

Robert Sabo         66        0          66

Avian Farms        1,000        0         1,000

Sea World of Ohio     1,800        0         1,800

Mary Z. Reed       1,500        0         1,500

Sea World of Ohio     1,200        0         1,200

           ________     __________      ______

 Total         26,559      (10,500)       16,059

             1991 Royalty Income

   Payor        Amount      Concessions      Total

    _____        ______      ___________      _____

Pennzoil Products     $ 249        $ 0        $ 249

Pennzoil Products      209         0         209

Pennzoil Products      241         0         241

Pennzoil Products      337         0         337

Pennzoil Products      217         0         217

Pennzoil Products      578         0         578

Pennzoil Products      369         0         369

Total          2,199         0        2,199

            ______       ________      ______

  Total Income  ¹   28,758       (10,500)      18,258

                APPENDIX E

As Stated in Notice of Deficiency    Concessions      Total

_________________________________    ___________      _____

   Payor        Amount

   _____        ______

 Programs, Inc.     $ 100         0        $ 100

Anheuser-Busch      2,000         0        2,000

Anheuser-Busch      2,700         0        2,700

Anheuser-Busch      1,400         0        1,400

Timothy L. Charles     500         0         500

Avian Farms         560         0         560

Avian Farms         350         0         350

Avian Farms         70         0          70

Anheuser-Busch      1,600         0        1,600

Anheuser-Busch      1,200         0        1,200

Anheuser-Busch      1,200         0        1,200

Cortland Savings

Bank            391       ($ 391)        0

            ______       _______      _______

 Total          8,271        (391)       17,880

   Payor        Amount      Concessions      Total

   _____        ______      ___________      _____

Pennzoil Products     $ 155        $ 0        $ 155

Pennzoil Products      281         0         281

Pennzoil Products       257         0         257

Pennzoil Products      332         0         332

Pennzoil Products      745         0         745

Pennzoil Products      432         0         432

           ________        ______      _______

Total          2,203         0        2,203

  Total Income  ¹   20,474        (391)      20,083

               APPENDIX F

   Payor       Amount    Payee          Account No.

   _____       ______    _____         ____________

Sea World of Ohio    $ 500    Dr. Temple

Sea World of Ohio     500    Dr. Temple

Sea World of Ohio    1,000    Dr. Temple

Sea World of Ohio    1,500    Dr. Temple

Swan Lake Llamas    5,750    Plume Enterprises     400359855

Sea World of Ohio    5,000    Plume Enterprises     400359855

Jerome T. Grone     2,500    Plume Enterprises     400359855

Sunny Hill Farm     1,500    Plume Enterprises     400359855

John C. Gifford      100    Plume Enterprises     400359855

Sunny Hill Farm    13,500    Plume Enterprises     400359855

John C. Gifford     1,100    Plume Enterprises     400359855

John C. Gifford     7,300    Plume Enterprises     400359855

 Total        47,750

               APPENDIX G

   Payor      Amount     Payee         Account No.

   _____      ______     _____         ____________

Llamas of Michigan  $ 2,450    Plume Enterprises     400359855

Llamas of Michigan   22,050    Plume Enterprises     400359855

Dennis Grodings      900    Plume Enterprises     400359855

Sea World of Ohio    1,500    Plume Enterprises     400359855

John C. Gifford     9,500    Plume Enterprises     400359855

Sea World of Ohio    1,500    Plume Enterprises     400359855

Sea World of Ohio     105    Plume Enterprises     400359855

Sea World of Ohio    1,500    Plume Enterprises     400359855

John C. Gifford     1,200    Plume Enterprises     400359855

Sea World of Ohio    1,500    Plume Enterprises     400359855

State of Ohio      3,649    Plume Enterprises     400359855

Ronald G. DeRhodes   22,000    Plume Enterprises     400359855

Hospital        5,000    Plume Enterprises     400359855

Sea World of Ohio    3,000    Plume Enterprises     400359855

Wendy H. Arbogast    1,800    Plume Enterprises     400359855

Constance A. Halle    150    Plume Enterprises     400359855

William C. Crawford    200    Plume Enterprises     400359855

William C. Crawford   1,000    Plume Enterprises     400359855

Sea World of Ohio    1,500    Plume Enterprises     400359855

Sea World of Ohio    1,500    Plume Enterprises     400359855

Sea World of Ohio    1,500    Plume Enterprises     400359855

Ronald C. Blidar    1,800    Plume Enterprises     400359855

Ronald C. Blidar    1,000    Plume Enterprises     400359855

Sea World of Ohio    1,500    Plume Enterprises     400359855

John C. Gifford      600    Galingale Group      400359863

 Total        88,404

               APPENDIX H

              1990 Gross Receipts

   Payor       Amount      Payee        Account No.

   _____       ______      _____       ____________

John C. Gifford    $ 9,500    Plume Enterprises     400359855

 Programs, Inc.     100    Plume Enterprises     400359855

Kerney L. Martini    8,500    Plume Enterprises     400359855

Sea World of Ohio    1,500    Plume Enterprises     400359855

Kerney L. Martini    7,500    Plume Enterprises     400359855

Intuit           2    Plume Enterprises     400359855

Sea World of Ohio    1,500    Plume Enterprises     400359855

 Programs, Inc.     350    Plume Enterprises     400359855

Sea World of Ohio    1,500    Plume Enterprises     400359855

Sea World of Ohio    1,200    Plume Enterprises     400359855

Sea World of Ohio    1,500    Plume Enterprises     400359855

Wendy H. Arbogast     200    Plume Enterprises     400359855

 Programs Inc.      100    Plume Enterprises     400359855

Sea World of Ohio    1,500    Plume Enterprises     400359855

Sea World of Ohio    1,500    Plume Enterprises     400359855

Robert Sabo        145    Plume Enterprises     400359855

Sea World of Ohio    1,500    Plume Enterprises     400359855

Ronald G. DeRhodes   1,200    Plume Enterprises     400359855

State of Ohio       728    Plume Enterprises     400359855

Wendy H. Arbogast    1,800    Plume Enterprises     400359855

Sea World of Ohio    1,500    Plume Enterprises     400359855

Sea World of Ohio    1,500    Plume Enterprises     400359855

Robert Sabo        135    Plume Enterprises     400359855

Robert Sabo        210    Plume Enterprises     400359855

Sea World of Ohio    1,500    Plume Enterprises     400359855

William Boever      15,500    Galingale Llamas  ¹   400359863

Robert Sabo        90    Plume Enterprises     400359855

Sea World of Ohio    1,500    Plume Enterprises     400359855

Sea World of Ohio    1,500    Plume Enterprises     400359855

Sea World of Ohio    9,000    Plume Enterprises     400359855

 Total        74,360

   _____       _______      _____       ____________

Scavenger Oil Corp. $ 1,800    Plume Enterprises     400359855

Pennzoil Products     257    Trundle Management

                  Eton Trust Co.,

                 Ltd. Trustee  ¹    1163506106

Pennzoil Products     289    Trundle Management

                 Ltd. Trustee      1163506106

Pennzoil Products     443    Trundle Management

          ________

 Total         2,789

  Total Income  ² 77,149

               APPENDIX I

                             Deposited in

  Payor        Amount       Payee       Account No.

  _____        ______       _____       ____________

Robert Sabo       $ 600    Wendy Arbogast      400359855

Robert Sabo        70    Plume Enterprises     400359855

Robert Sabo        35    Plume Enterprises     400359855

International      250    Plume Enterprises     400359855

Robert Sabo       1,000    Plume Enterprises     400359855

Robert Sabo        500    Plume Enterprises     400359855

 Programs, Inc.     200    Plume Enterprises     400359855

State of Ohio      1,000    Plume Enterprises     400359855

Robert Sabo        123    Plume Enterprises     400359855

Avian Farms       2,750    Plume Enterprises     400359855

Mary Z. Reed       500    Plume Enterprises     400359855

Avian Farms        35    Plume Enterprises     400359855

ITT Hartford       595    Plume Enterprises     400359855

Robert Sabo        66    Plume Enterprises     400359855

Avian Farms       1,000    Plume Enterprises     400359855

Sea World of Ohio    1,800    Plume Enterprises     400359855

Mary Z. Reed      1,500    Plume Enterprises     400359855

Sea World of Ohio    1,800    Plume Enterprises     400359855

Sea World of Ohio    1,200    Plume Enterprises     400359855

 Total        16,059

   Payor       Amount       Payee       Account No.

   _____       ______       ______       ____________

Pennzoil Products    $ 249    Trundle Management

                  Eton Trust Co.,

                 Ltd., Trustee  ¹    1163506106

Pennzoil Products     209    Trundle Management

Pennzoil Products     241    Trundle Management

Pennzoil Products     337    Trundle Management

Pennzoil Products     217    Trundle Management

Pennzoil Products     578    Trundle Management

Pennzoil Products      369    Trundle Management

 Total         2,199

  Total Income  ² 18,258

               APPENDIX J

Anheuser-Busch     2,000    Plume Enterprises     400359855

 Total         17,880

Pennzoil Products    745    Trundle Management

  Total Income  ² 20,083

---

Footnotes

• 1. Respondent concedes the following amounts of income set forth in the computation of petitioner's gross receipts from veterinary services and the sale of animals in the statutory notice of deficiency: $ 34,450 in 1988 (see appendix A); $ 1,815 in 1989 (see appendix B); $ 1,800 in 1990 (see appendix C); $ 10,500 in 1991 (see appendix D); and $ 391 in 1992 (see appendix E).

• 2. 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.

• 3. Anheuser Busch purchased Sea World in 1989.

• 4. Purchased a snake.

• 1. See appendix F.

• 2. See appendix G.

• 3. See appendix H.

• 4. See appendix I.

• 5. See appendix J.

• 5. See appendix F.

• 6. All amounts throughout this opinion are rounded to the nearest dollar.

• 7. See appendix H. This check was payable to Galingale Llamas and deposited into a Bank One account, account No. 400359863 (Bank One 863 account). Mrs. Temple had signatory authority over this account.

• 8. See appendix I. This check was payable to Wendy Arbogast but deposited in Plume Enterprises' Bank One account, account No. 400359855 (Bank One 855 account). Mrs. Temple had signatory authority over this account.

• 9. See appendix J. These checks were payable to Galingale Group and deposited into the Bank One 863 account. Mrs. Temple had signatory authority over this account.

• 10. See appendixes F, G, H, I, and J.

• 11. For a period that included June 10, 1988, through Sept. 25, 1992.

• 1. These checks, totaling $ 3,500, were deposited in an account with Second National Bank, account No. 1163506106. Mrs. Temple had signatory authority over this account, and monthly bank statements were sent to petitioner's residence.

• 2. These checks, totaling $ 3,500, were deposited in an account with Second National Bank, account No. 1163506106. Mrs. Temple had signatory authority over this account, and monthly bank statements were sent to petitioner's residence.

• 12. For a period that included June 13, 1988, through Sept. 30, 1992.

• 1. These checks, totaling $ 8,000, were deposited in an account with Second National Bank, account No. 1163506106. Mrs. Temple had signatory authority over this account, and monthly bank statements were sent to petitioner's residence.

• 2. These checks, totaling $ 8,000, were deposited in an account with Second National Bank, account No. 1163506106. Mrs. Temple had signatory authority over this account, and monthly bank statements were sent to petitioner's residence.

• 3. These checks, totaling $ 8,000, were deposited in an account with Second National Bank, account No. 1163506106. Mrs. Temple had signatory authority over this account, and monthly bank statements were sent to petitioner's residence.

• 4. These checks, totaling $ 8,000, were deposited in an account with Second National Bank, account No. 1163506106. Mrs. Temple had signatory authority over this account, and monthly bank statements were sent to petitioner's residence.

• 13. Account No. 23-043-10. See appendix J.

• 14. For the period beginning Aug. 18 and ending Oct. 30, 1992. owner's address.

• 1. L. R. Mayer was the executive director of Oxford Charter Corp. during 1987. Oxford Charter Corp. was listed as trustee on Plume Enterprises' Bank One 855 account and for a Plume Enterprises' bank account with Society Bank of Eastern Ohio.

• 2. Control Management had a contract with Plume Enterprises with Pritchel & Pritchel as trustee. The agreement stated, in part, that Control Management would establish and maintain bank accounts for Plume Enterprises.

• 3. The notation on this check indicates that it is payment for trustee fees.

• 15. For a period that included May 2, 1988, through Dec. 29, 1992.

• 16. Several substantial deposits were also made into Piccolo's account by Plume Enterprises, drawn on account No. 400359855 and by Trundle Management, drawn on account No. 1163506106. All these deposits were made by checks signed by Mrs. Temple in the years 1988- 1992.

• 17. We note that petitioner's attorney Frank R. Bodor was the taxpayer, along with his wife Gina Bodor, in Bodor v. Commissioner, T.C. Memo 1993-456, affd. without published opinion 52 F.3d 324 (6th Cir. 1995). In that case, this Court found that Robert Temple signed checks for an entity created and operated by Mr. and Mrs. Bodor pursuant to a plan to create tiered structures of domestic and foreign trust shell entities to disguise the fact that Mr. and Mrs. Bodor or their minor children still owned property.

• 1. This check was issued in 1992 and signed by B. L. Holtzhauer with what appears to be a signature stamp.

• 18. For a period that included Nov. 22, 1988, through Mar. 15, 1990.

• 19. For a period that included Mar. 15, 1990, through Dec. 7, 1992.

• 20. Nassau Life Insurance Co. was an entity which assisted taxpayers to avoid the payment and collection of their Federal income taxes. See Boyce v. Commissioner, T.C. Memo 1990-658, affd. without published opinion 955 F.2d 47 (9th Cir. 1992); see also Para Techs. Trust v. Commissioner, T.C. Memo 1992-575; and Johnson v. Commissioner, T.C. Memo 1989-591. Due to illegal activities and a "tax situation", Nassau Life Insurance Co. ceased operations. See Bodor v. Commissioner, T.C. Memo 1993-456.

• 21. The tax mailing address used by Nassau Life Insurance Co. on the warranty deeds was P.M.B. 11 Grand Turk, Turks & Caicos Islands, British West Indies.

• 22. The tax mailing address used by Eton Trust Co., Ltd., on the warranty deeds was Grant Petroleum Building, Providenciales, British West Indies.

• 23. The timing of the transfer is similar to the facts in Bodor v. Commissioner, supra. The taxpayer in that case was Frank R. Bodor. He is the attorney representing petitioner in the present case. In Bodor, we found that the taxpayer transferred his interest in eight properties by quitclaim to various foreign entities for which Nassau Life Insurance Co. served as trustee, that due to illegal activities in late 1986 or early 1987, Nassau Life ceased operations, and that Mr. Bodor knew that the problems stemmed from illegal activities and a "tax situation".

• 1. See appendix H.

• 2. See appendix I.

• 3. See appendix J.

• 24. For a period that included June 9, 1988, through Jan. 8, 1993.

• 1. B. L. Holtzhauer signed one check in the amount of $ 60,

  payable to Universal Disposal in 1992.

• 25. See appendix F.

• 26. See appendix G.

• 27. See appendix H.

• 28. See appendix I.

• 29. See appendix J.

• 30. One check for $ 600 was actually made payable to one of petitioner's customers, Wendy Arbogast, but deposited into the Bank One 855 account. See appendix I.

• 31. Consisting of checks totaling $ 11,534 from the Bank One 855 account and checks totaling $ 26,720 from the Bank One 863 account.

• 32. Additional checks totaling $ 825 were used to pay L. R. Mayer ($ 125), Control Management ($ 400), and McMeyers & Ford ($ 300). We believe these expenses were incurred, in part, to maintain the appearance of a valid trust arrangement. Most of the remaining funds were spent on travel expenses.

• 33. Sec. 6653(b)(1) provides, in part:

  SEC. 6653(b) Fraud.--

  (1) In General. -- If any part of any underpayment * * * of tax required to be shown on a return is due to fraud, there shall be added to the tax an amount equal to 75 percent of the portion of the underpayment which is attributable to fraud.

• 34. Sec. 6651(f) provides:

  SEC. 6651(f) Increase in Penalty for Fraudulent Failure to File. -- If any failure to file any return is fraudulent, paragraph (1) of subsection (a) shall be applied --

  (1) by substituting "15 percent" for "5 percent" each place it appears, and

  (2) by substituting "75 percent" for "25 percent".

  Sec. 6651(a)(1) provides in relevant part:

  SEC. 6651. FAILURE TO FILE TAX RETURN OR TO PAY TAX.

  (a) addition to the Tax. -- In case of failure --

  (1) to file any return required under authority of subchapter A of chapter 61 * * * on the date prescribed therefore (determined with regard to any extension of time for filing), unless it is shown that such failure is due to reasonable cause and not due to willful neglect, there shall be added to the amount required to be shown as tax on such return 5 percent of the amount of such tax if the failure is for not more than 1 month, with an additional 5 percent for each additional month or fraction thereof during which such failure continues, not exceeding 25 percent in the aggregate;

• 35. See appendix A or F.

• 36. See appendix B or G.

• 37. See appendix C or H.

• 38. See appendix D or I.

• 39. See appendix E or J.

• 40. Use of bank accounts fashioned as trust accounts to conceal assets.

• 1. On some checks, more than one party is listed on a payor's check (i.e., John and Maria Gifford). We note, that in some instances, respondent may list one payor (i.e., John Gifford) as the payor when in fact it was the other party, presumably his spouse (i.e., Maria Gifford) who signed the check. These differences haveno impact on our decision, and for consistency, we use only the name of the party used by respondent in the notice of deficiency throughout these appendixes.

• 1. In the notice of deficiency, the total is $ 74,360, however, this appears to be an adding error.

• 1. Respondent originally included payment from Scavenger Oil in its computation of petitioner's gross receipts from the sale of animals and for royalty income. In respondent's concessions, the double counting of this one check was eliminated. We note that the record is not clear on whether the payment was for the purchase of an animal or for royalty payments. Nevertheless, it is clear that petitioner received an $ 1,800 payment from Scavenger Oil in 1990. Whether the check represents payment for the purchase of an animal or royalty income has no bearing on the outcome of this case. In either case, it is taxable income to petitioner as ordinary income.

• 2. Includes totals from previous page.

• 1. There is a $ 1 difference in the totals due to rounding.

• 1. The deposit slip shows that Galingale Llamas belongs to Galingale Group.

• 1. Petitioner's address is listed as the mailing address for all checks made payable to Trundle Management.

• 1. Petitioner's address is listed as the mailing address for all checks made payable to Trundle Management.

• 2. There is a $ 1 difference in the totals due to rounding.

• 1. Petitioner's address is listed as the mailing address for all checks made payable to Trundle Management.