William Kale v. Commissioner , 1996 T.C. Memo. 196 ( 1996 )

T.C. Memo. 1996-196UNITED STATES TAX COURT
WILLIAM KALE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 20516-92. Filed April 23, 1996.
David L. Segal and Jeffry H. Homel, for petitioner.
Keith Gorman and Doug Fendrick, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
PARR, Judge: Respondent determined deficiencies in, and
additions to, petitioner’s Federal income tax as follows:
Additions to Tax
Sec. Sec. Sec.
Year Deficiency 6653(b) 6653(b)(1) 6653(b)(2)
1980 $48,603 $24,302 - -
1
1982 1,114 - $557
1
1983 1,092 - 546
1
50 percent of the interest due on the underpayment attributable
to fraud.
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The issues for decision are: (1) Whether petitioner is
collaterally estopped from denying that he received bribe income
during the years in issue. We hold that he is not. (2) Whether
petitioner received unreported bribe income during the years in
issue. We hold that he did. (3) Whether petitioner is liable for
additions to tax for fraud pursuant to section 6653(b).1 We hold
that he is. (4) Whether respondent is precluded from assessing
tax for the years in issue due to the running of the statute of
limitations. Due to our holding in issue 3 above, we hold that
she is not.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulation of facts and attached exhibits are incorporated
herein by this reference. At the time the petition herein was
filed, petitioner resided in Pompano Beach, Florida.
Petitioner
Petitioner received a Bachelor of Science degree in
accounting from the Drexel Institute of Technology in 1949. From
1953 to January of 1981, petitioner was employed as a Revenue
Agent with the Examination Division of the Philadelphia Office of
the Internal Revenue Service (IRS). As a revenue agent,
petitioner was responsible for conducting examinations of filed
1
All section references are to the Internal Revenue Code in
effect for the taxable years in issue, and all Rule references
are to the Tax Court Rules of Practice and Procedure, unless
otherwise indicated.
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Federal income tax returns and preparing Revenue Agent’s Reports
(RAR's), reflecting proposed changes to taxpayers’ examined
returns.
Examinations determine whether a taxpayer is due a refund,
owes additional taxes, or correctly reported his tax liability.
If no adjustments are made in an examination, a taxpayer receives
a clearance letter indicating that the return was accepted as
filed and the examination is closed. If adjustments are made,
RAR’s are then sent to the taxpayer, who, if in agreement with
the adjustments, signs the RAR. After signing the RAR, it is
forwarded to an IRS review department, which reviews the RAR and,
upon accepting the RAR’s findings, issues a clearance letter to
the taxpayer, closing the examination.
From at least 1979, petitioner was assigned to examination
group 1201, elevated to a Grade 13, the most senior revenue agent
position below management, and was responsible for examining the
most complex cases.
Charles Toll
Sometime in the early 1960's, petitioner examined the tax
returns of Colonial Beef Company. Needleman & Toll (Needleman)
was the accounting firm that handled Colonial Beef’s tax returns
and tax audits. Charles Toll (Toll) was an accountant at
Needleman until 1966. During the years he worked at the firm,
Toll was aware that Needleman was negotiating or paying bribes to
IRS agents in order to receive favorable IRS examination results.
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While handling the Colonial Beef examination, Toll paid a bribe
to petitioner in order to receive favorable examination results.
Cynwyd
While at Needleman, Toll was responsible for the Saligman
and Cravitz families’ tax returns and tax audits. These families
held interests in numerous partnerships. Toll was also
responsible for representing those families with respect to the
tax returns and tax audits of these partnerships. The managing
general partners of these partnerships were three partnerships:
Saligman Special, Saligman Capital, and Cynwyd Investments.
Cynwyd Investments was primarily owned by members of the Saligman
and Cravitz families. By 1977, Toll also held an interest in
Cynwyd Investments. Hereinafter, references to the Cynwyd Group,
will refer to the various partnerships and entities owned
directly or indirectly by the Cravitz and Saligman families.
Toll was aware that the Saligman and Cravitz families,
through Needleman, were paying bribes to various IRS agents in
order to receive favorable audit results. In 1966, Toll was
hired by the Saligman and Cravitz families to oversee all of the
Cynwyd Group’s accounting, taxes, and finances. Toll remained at
that position until 1984, when a criminal investigation of the
Cynwyd Group commenced.
Petitioner’s Cynwyd Examinations
Sometime between October 1978 and April 1979, petitioner was
assigned the examination of the 1977 tax return of the Rita
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Cooper trust. Rita Cooper was a member of the Saligman family.
In April 1979, petitioner began his examination of the 1977 Rita
Cooper trust return and the 1977 tax return of the Harvey
Saligman trust. Petitioner expanded his examination to include
the 1978 tax returns for the two trusts. Neither the Rita Cooper
Trust, nor the Harvey Saligman Trust, was a partner in the Cynwyd
Investments partnership. The trusts did hold interests in
various partnerships in which Cynwyd Investments held an
interest, and which were a part of the Cynwyd Group.
Petitioner notified Toll that he was examining the two trust
returns. Petitioner and Toll entered into discussions about the
audit. The outcome of those discussions was that Toll would pay
petitioner $105,000 to (1) extend his examination to include the
1977 and 1978 tax returns of various members of the Cynwyd Group,
including, among others, the returns of Cynwyd Investments,
Saligman Capital, and the individual returns of the Saligman and
Cravitz family members, and (2) make sure that the examinations
resulted in favorable tax treatment by overlooking various tax
adjustments that otherwise would have been required. Toll agreed
to pay petitioner the $105,000 in periodic installments upon
Toll’s receipt of IRS clearance letters from the IRS review
department.
Suval’s Review
From the beginning of 1979 through August 1980, Irving Suval
(Suval) was the assistant review chief of the Philadelphia IRS
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review department. Suval had been employed by the IRS for over
30 years. Petitioner was aware that Suval had received bribes in
the past in order to compromise audits. In early 1980,
petitioner approached Suval, confided to him that he, petitioner,
was going to receive bribe payments from Toll for favorably
auditing the 1977 and 1978 Cynwyd Group returns, and offered
Suval $6,500 to expedite the processing through the review
department of certain of the Cynwyd Group returns which
petitioner examined.
Payment of $105,000
Toll paid petitioner the $105,000 bribe in five installments
beginning in August 1980 and ending November 1980.
Toll’s Bribe to Suval
Sometime in 1980, before the Cynwyd Group’s 1977 and 1978
returns were cleared, Toll requested petitioner to extend his
examination to include the Cynwyd Group’s 1979 and 1980 tax
returns. An Examination Division policy precluded petitioner
from examining the 1979 and 1980 returns. Petitioner, however,
was able to ensure that the returns would be examined by group
1201, petitioner’s examination group. In September 1980, Suval
became group 1201's examination manager. Petitioner informed
Suval that he arranged for the Cynwyd Group’s 1979 and 1980
returns to be examined by group 1201 and that Toll would pay
Suval $65,000 to compromise the audit. Suval and petitioner
agreed that Suval would pay petitioner $7,500 for setting up the
$65,000 bribe.
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In January 1981, petitioner retired from the IRS. Prior to
retiring, petitioner assured Toll that Suval would compromise the
1979 and 1980 audit. Suval and Toll met in June 1981 to confirm
the $65,000 bribe. Subsequently, Suval requested, and Toll
agreed to pay, an additional $50,000, for a total of $115,000, to
ensure the favorable audit. Petitioner was unaware of the
additional $50,000 bribe.
Payment of the $65,000 Bribe
Toll paid Suval the $115,000 in installments beginning in
the Autumn of 1981, and ending in 1983. Suval paid petitioner the
agreed upon $7,500 in installments as Suval received his payments
from Toll.
Criminal Investigation
In early 1984, IRS inspectors confronted Suval with their
knowledge of Suval’s having receiving bribes. Suval agreed to
cooperate with the U.S. Government by wearing a “body wire” in
conversations Suval had with petitioner in April 1984. Suval was
subsequently indicted for, and pleaded guilty to, bribery and
conspiracy to commit bribery, among other offenses.
Concurrently, a criminal investigation of the Cynwyd Group’s
operations commenced in connection with their bribing IRS
officials. Toll was subsequently indicted for, and pleaded
guilty to, bribery and conspiracy to commit bribery, among other
offenses.
On February 4, 1986, petitioner was indicted by the Federal
Grand Jury for and in the U.S. District Court for the Eastern
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District of Pennsylvania for one count of conspiracy to defraud
the United States under 18 U.S.C. sec. 371 (1994) and one count
of aiding and abetting the bribery of a public official under 18
U.S.C. sec. 201(b) (1994).
In count one of the indictment the grand jury charged
petitioner of conspiring with Toll and Suval to defraud the
United States. The object of the conspiracy was for petitioner
and Suval to receive bribes from Toll in return for conducting
inadequate examinations of the Cynwyd Group’s tax returns. Among
the 55 overt acts contained in count one of the indictment were
the following: (1) Petitioner's meeting with Toll at various
times to discuss examination of specific Cynwyd Group returns;
(2) petitioner’s causing the IRS to issue certain clearance
letters; (3) Toll's meeting with Suval at various times to
discuss the examination of various Cynwyd Group returns; (4)
Suval’s causing the IRS to issue certain clearance letters; (5)
Toll's making payments to Suval.
In its instructions to the jury at petitioner’s criminal
trial concerning the count of conspiracy, the court stated as
follows:
In order to meet the burden of proof as to
* * *[the Count of conspiracy] against * * *
[petitioner], there are five things that the
Government must prove beyond a reasonable doubt:
First, that the conspiracy described in the Bill
of Indictment was formed and was existing at or about
the times that are alleged;
Secondly, that * * * [petitioner] intentionally,
willfully, became a member of that conspiracy;
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That thereafter one of the conspirators committed
at least one - not all, but at least one - of the overt
acts charged in the indictment at or about the time and
place alleged;
Fourth, that such overt act was done in
furtherance of some object or purpose of the
conspiracy; and
Fifth, that one of the conspirators did something
on or after February 4, 1981, to further some aspect
of the conspiracy, that is, to accomplish one or more
of its purposes. [Emphasis added.]
Petitioner was subsequently convicted on both the count of
conspiracy and the count to aid and abet.
Deficiency notice
Based on facts adduced at petitioner’s criminal trial,
respondent determined the deficiencies set out above. In the
deficiency notice, respondent made adjustments increasing
petitioner's gross income by $3,750 for each of the 1982 and 1983
taxable years based on Suval’s testimony at the criminal trial.
Suval testified that he paid petitioner $7,500 over a 2-year
period ending in 1983, but because he did not say exactly when
the $7,500 was paid, respondent apportioned the $7,500 equally
between 1982 and 1983.
OPINION
I. Deficiency
A taxpayer is required to maintain records sufficient to
establish their tax liabilities. Sec. 6001. If the taxpayer
fails to maintain such records or the records maintained are
inadequate, then respondent is authorized to reconstruct income
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by any reasonable method, which in her opinion clearly refects
the taxpayer’s income. Petzoldt v. Commissioner, 92 T.C. 661,
693-694 (1989); Harbin v. Commissioner, 40 T.C. 373, 377 (1963).
Based on facts adduced at petitioner’s criminal trial, respondent
determined that petitioner received unreported bribe income for
the years in issue. It is clear that bribes received are
includable in gross income. Sec. 61(a); sec. 1.61-14(a), Income
Tax Regs. It is also well settled that, except where otherwise
provided in the Internal Revenue Code or Tax Court Rules of
Practice and Procedure, the burden of proof rests with
petitioner. See Rule 142(a); Welch v. Helvering, 290 U.S. 111(1933). Thus, petitioner bears the burden of proving that he did
not receive the bribes in question during the years in issue and
that respondent’s determinations are incorrect.
A. Collateral Estoppel
Respondent first argues that petitioner, by his conviction
in Federal District Court on the count of conspiracy to bribe, is
collaterally estopped from denying that he received the bribes in
question. We disagree.
The Court has recognized that a criminal conviction can
operate as collateral estoppel in a subsequent civil case. Arctic
Ice Cream Co. v. Commissioner, 43 T.C. 68 (1964). However, the
judgment in the prior action will act as an estoppel only as to
those issues or elements, upon the determination of which the
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verdict of guilty was necessarily rendered. Commissioner v.
Sunnen, 333 U.S. 591 (1948).
In petitioner’s criminal trial, the judge instructed the
jury that in order to find petitioner guilty of conspiracy, the
jury had to find, among other things:
Secondly, that * * * [petitioner] intentionally,
willfully, became a member of that conspiracy;
That thereafter one of the conspirators committed
at least one - not all, but at least one - of the overt
acts charged in the indictment at or about the time and
place alleged;
Fourth, that such overt act was done in
furtherance of some object or purpose of the
conspiracy; and
Fifth, that one of the conspirators did something
on or after February 4, 1981, to further some aspect of
the conspiracy, that is, to accomplish one or more of
its purposes. [Emphasis added.]
There are 55 overt acts found in the bill of indictment relating
to the count of conspiracy. The large majority of those acts are
not bribery payments to petitioner. Some of the acts are bribe
payments from Toll to Suval which occurred after February 4,
1981. Some of the acts are meetings between Toll and Suval which
occurred after February 4, 1981. In order to reach the verdict,
the jury was only required to find that one of the conspirators--
Toll, Suval, or petitioner--performed one of these 55 overt acts,
and that one of the conspirators did something to further the
conspiracy after February 4, 1981. The jury was not, however,
required to find that petitioner actually received bribe payments
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in the amounts which respondent has included in his gross income.
Accordingly, petitioner is not estopped from denying that he did
not receive such bribe payments.
B. Petitioner’s Burden of Proof
We have taken petitioner’s proposed findings of fact into
account even though we were not required to as petitioner
violated Rule 151(e)(3), which prescribes how litigants are to
treat proposed findings of fact.2 See Van Eck v. Commissioner,
T.C. Memo. 1995-570. Petitioner failed to include separate,
numbered, statements of fact, or to object to respondent’s
proposed findings in his reply. Petitioner appeared to concede
in his statement of “facts adduced at trial” that petitioner
received a $105,000 bribe from Toll.
Petitioner has failed to prove respondent’s determinations
to be incorrect. Petitioner does not attempt to meet his burden
2
Rule 151(e)(3) states that briefs shall contain:
Proposed findings of fact (in the opening brief or
briefs), based on the evidence, in the form of numbered
statements, each of which shall be complete and shall
consist of a concise statement of essential fact and
not a recital of testimony nor a discussion or argument
relating to the evidence or the law. In each such
numbered statement, there shall be inserted references
to the pages of the transcript or the exhibits or other
sources relied upon to support the statement. In an
answering or reply brief, the party shall set forth any
objections, together with the reasons therefor, to any
proposed findings of any other party, showing the
numbers of the statements to which the objections are
directed; in addition, the party may set forth
alternative proposed findings of fact.
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of proving that he did not receive unreported bribe income during
the years in issue, but rather spends the bulk of his time
arguing that respondent did not meet her burden of proving fraud.
Petitioner states in his brief:
Respondent enjoys no presumption of correctness in
her assessment. Instead, * * * [petitioner] is
presumed not to have received * * * [the bribes] unless
Respondent affirmatively establishes (1) that * * *
[petitioner] took the bribes and, if so, (2) how much
he received * * *.
Petitioner’s understanding of who bears the burden of proof is
skewed. Despite respondent’s burden of proving fraud, Rule
142(b), petitioner still bears the burden of proof regarding the
deficiency. Rule 142(a); Welch v. Helvering, supra.3 Viewing
the procedural posture of this case in an incorrect light,
petitioner offers little evidence other than his own testimony,
which is insufficient to overcome respondent's determination of
income tax deficiencies. Petitioner’s testimony was at complete
odds with the hard evidence. For example, petitioner claims that
his trail of investigation led him to the tax returns of Cynwyd
Investment and Saligman Capital, which opened the door for
investigation of the Cynwyd Group’s returns. However, a review
of petitioner’s work chronology finds that result impossible.
Petitioner first examined the 1977 and 1978 returns of the Rita
Cooper Trust and the Harvey Saligman Trust. He found a problem
3
In regard to the burden of proof in fraud cases, see
Franklin v. Commissioner, T.C. Memo. 1993-184.
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concerning a certain credit, which was passed through to the
trusts from a partnership called Traylor Syndicate (Traylor). It
was this credit, according to petitioner, which paved the trail
to the Cynwyd Group. We do not see how. Logically, the next tax
returns that petitioner should have examined were those of
Traylor, through which the credits passed to the trusts.
However, the next returns which petitioner did, in fact, examine
were those of Cynwyd Investments and Saligman Capital. Yet, the
trusts were not partners in either of those partnerships. We
find no basis for petitioner’s extension of his investigation to
include the Cynwyd Group, other than that he was paid by Toll to
do so. Accordingly, we disregard petitioner’s testimony.
Petitioner offers little other evidence to aid him in meeting his
burden of proof.
We find, therefore, that petitioner has failed to carry his
burden of proving that he did not receive unreported bribe income
of $105,000 in 1980 and $7,500 during 1982 and 1983.
Additionally, petitioner has not shown that respondent’s method
of allocating the $7,500 equally between 1982 and 1983 is
unreasonable. Harbin v. Commissioner, 40 T.C. at 377.
Accordingly, we sustain respondent’s deficiency determinations.
II. Additions to Tax for Fraud
Respondent determined that petitioner is liable for
additions to tax for fraud under section 6653(b) for 1980, and
section 6653(b)(1) and (2) for 1982 and 1983.
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A. Section 6653(b) and Section 6653(b)(1)
For 1980, section 6653(b), and for 1982 and 1983, section
6653(b)(1) provide for an addition to tax in an amount equal to
50 percent of any underpayment in tax if any part of such
underpayment is due to fraud.
The existence of fraud is a question of fact to be
determined on the basis of the entire record. Gajewski v.
Commissioner, 67 T.C. 181, 199 (1976), affd. without published
opinion 578 F.2d 1383 (8th Cir. 1978). The principal issue in
ascertaining whether fraud is present is whether the taxpayer has
engaged in conduct with the specific intent to evade a tax known
or believed to be properly owing. Rowlee v. Commissioner, 80
T.C. 1111, 1123 (1983).
For purposes of the section 6653(b) and section 6653(b)(1)
additions, the Commissioner bears the burden of proving, by clear
and convincing evidence, (1) that some underpayment of tax
existed for each of the years in issue and, (2) that some part of
the underpayment of tax was attributable to the taxpayer’s fraud.
Sec. 7454(a); Rule 142(b); Parks v. Commissioner, 94 T.C. 654,
660-661 (1990); Imburgia v. Commissioner, 22 T.C. 1002, 1014
(1954). Where fraud is determined for more than 1 year, the
Commissioner's burden applies separately to each year. Barbuto
v. Commissioner, T.C. Memo. 1991-342 (citing Estate of Stein v.
Commissioner, 25 T.C. 940, 959-963 (1956), affd. sub nom. Levine
v. Commissioner, 250 F.2d 798 (2d Cir. 1958)).
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1. Underpayment
The first element requires the Commissioner to establish the
existence of some underpayment of tax for each of the years in
issue. Section 6653(c) defines underpayment as having in general
the same meaning as "deficiency;" i.e., to mean the amount by
which the tax imposed exceeds the amount of tax shown by the
taxpayer on his return. Sec. 6211. To prove an underpayment,
the Commissioner cannot satisfy her burden by relying solely on
the taxpayer's failure to prove error in the determination of the
deficiencies. Otsuki v. Commissioner, 53 T.C. 96, 106 (1969).
Respondent’s case rests heavily on the testimony of Toll and
Suval during the trial in this proceeding. As petitioner states
in his brief:
Mr. Toll claims to have paid * * * [petitioner] a
$105,000 bribe to subvert the 1977 and 1978 audits; Mr.
Suval says he paid * * * [petitioner] $7,500 for having
introduced him to Mr. Toll. * * * If * * * [Toll and
Suval’s] believed testimony is clear and convincing,
then * * * [petitioner] owes taxes for the years at bar
* * *.
We have found the testimony of Toll, in particular, and Suval to
be trustworthy and convincing. We acknowledge that Toll and
Suval pleaded guilty to various crimes in relation to the bribes.
We do not find that either of them had a motive that would prompt
false testimony in this case. We acknowledge that, at times,
Toll’s testimony was not in complete accord with Suval's.
However, the events of this case occurred over a decade ago. We
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find the few contradictions in testimony to be understandable and
of little importance.
Furthermore, other evidence, including Toll’s records of the
bribes he paid petitioner supports their testimony. We have also
found the transcript of the “wired” conversation between Suval
and petitioner, though not explicit, to be very damaging to
petitioner.
We wish to note, however, that the expert report and opinion
of John Lackey add little weight to respondent’s case. First,
Mr. Lackey did not review all the returns which petitioner
examined. Additionally, the mistakes that Mr. Lackey found in
petitioner’s 1977 and 1978 tax return examinations could have
been unintentional, possibly resulting from petitioner’s
completing them in a hurry, or from the fact that petitioner did
not have the extensive examination resources that Mr. Lackey had.
This conclusion could be supported by the fact that Mr. Lackey
found similar mistakes in the 1979 and 1980 Cynwyd Group returns
which he examined, even though petitioner did not examine those
returns.
Nonetheless, even though we give little weight to Mr.
Lackey’s report, we find that respondent has proven, by clear and
convincing evidence, that petitioner received unreported bribe
income in 1980, 1982 and 1983. Accordingly, respondent has met
her burden of proving that underpayments existed for the years in
issue.
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2. Fraudulent Intent
The second element requires the Commissioner to prove
fraudulent intent on the part of the taxpayer. Fraud will never
be presumed. Beaver v. Commissioner, 55 T.C. 85, 92 (1970).
Respondent may prove fraud through circumstantial evidence, as
direct proof of the taxpayer's intent is rarely available. The
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, supra at 105-106.
Courts have developed various factors or "badges" that tend
to establish fraud. Recklitis v. Commissioner, 91 T.C. 874, 910
(1988). These include: (1) A pattern of understatement of
income; (2) inadequate records; (3) concealment of assets; (4)
income from illegal activities; (5) attempting to conceal illegal
activities; (6) implausible or inconsistent explanations of
behavior; and (7) dealing in cash. Id. Repeated understatements
in successive years, when coupled with other circumstances
showing an intent to conceal or misstate taxable income, present
a basis on which we may properly infer fraud. Patton v.
Commissioner, 799 F.2d 166, 171 (5th Cir. 1986), affg. T.C. Memo.
1985-148.
We believe petitioner’s underpayments to have been due to
fraud. Petitioner was convicted for being a part of a conspiracy
to defraud the United States. He received bribes during the
years in issue. Petitioner was employed as a revenue agent at
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the IRS for nearly 30 years, reaching the highest possible grade
allowed to nonmanagement agents, and was fully aware that those
bribes are includable in income and should have been reported on
his Federal tax returns. Petitioner did not report those bribes.
He did not maintain any records of the bribes. All in all, we
find that petitioner’s entire course of conduct reveals that he
willfully intended to prevent the collection of tax he knew was
owing on the illegal bribe income. We therefore find that the
full amount of the underpayment for each year is attributable to
petitioner's fraud. Accordingly, we sustain respondent's
determination of additions to tax under sections 6653(b) and
section 6653(b)(1).
B. Section 6653(b)(2)
Under section 6653(b)(2), an addition to tax equal to 50
percent of the interest payable under section 6601 is imposed on
the portion of the underpayment attributable to fraud.
Respondent bears the burden of proving by clear and convincing
evidence the specific portion of the underpayment due to fraud in
each year. DiLeo v. Commissioner, 96 T.C. 858, 873 (1991), affd.
959 F.2d 16 (2d Cir. 1992). Accordingly, to adjudicate an
addition to tax under section 6653(b)(2), first we must examine
the evidence and satisfy ourselves as to the amount that clearly
and convincingly is an underpayment. Then, we must determine
whether any or all of such amount clearly and convincingly is due
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to fraud. Only to that extent can respondent prevail in her
determination of an addition to tax under section 6653(b)(2).
Based, in part, on the testimony of Toll and Suval and
records kept by Toll, we are convinced that petitioner received
an unreported $105,000 bribe in 1980, and thus an underpayment
attributable to fraud resulting from that amount exists for that
year. The $7,500 bribe, however, poses a problem. We have
sustained respondent’s adjustment in regard to the $7,500. We
did so because petitioner failed to meet his burden of proving
that he did not receive that amount over 1982 and 1983 and that
respondent’s method of allocation was unreasonable. We have
found, based on respondent’s evidence, which we regard as clear
and convincing, that petitioner did indeed receive from Suval
unreported bribe payments totaling $7,500. However, respondent
has not adequately proven when petitioner received those
payments. Suval testified that he received bribe payments from
Toll over a course of 2 years, beginning at the end of 1981, and
that he paid petitioner the $7,500 in installments, upon
receiving his own payments from Toll. Suval did not testify,
however, that he paid the entire $7,500 to petitioner in 1982 and
1983. Notwithstanding that fact, we can approximate petitioner’s
receipts, bearing heavily on respondent who bears the burden of
proof on this issue. Sec. 6653(b)(2); Rule 142(b); see Cohan v.
Commissioner, 39 F.2d 540 (2d Cir. 1930). Exhibit 16-P includes a
record of Toll’s $65,000 bribe payments to Suval (not included
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was the subsequent $50,000 bribe promised to Suval of which
petitioner was unaware). Of that $65,000, 8 percent, or $5,000,
was paid in 1981; 46 percent, or $30,000, was paid in each of the
years 1982 and 1983. Based on that evidence, we find that of the
$7,500 that petitioner received from Suval, 8 percent, or $600,
was paid to petitioner in 1981, and 46 percent, or $3,450 was
paid to petitioner in each of the years 1982 and 1983.
Accordingly, we find petitioner to have had unreported income of
$3,450 in each of the years 1982 and 1983. See Cohan v.
Commissioner, supra.
We have already determined that the entire amount of each
such underpayment is due to fraud. Therefore, the "portion of
the underpayment * * * attributable to fraud" is the portion
of the underpayment resulting from unreported income of $3,450 in
both 1982 and 1983. Accordingly, the addition to tax under
section 6653(b)(2), for each of the years 1982 and 1983, is equal
to 50 percent of the interest payable under section 6601 with
respect to the underpayment resulting from unreported income of
$3,450.
III. Statute of Limitations
Section 6501(c)(1) provides for the assessment of tax at any
time in the case of a fraudulent return. We have found that
respondent has proven fraud on the part of petitioner for each of
the years in issue and, accordingly, the period for assessment
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remains open for petitioner. Vannaman v. Commissioner, 54 T.C.
1011, 1016-1018 (1970).
Decision will be entered
under Rule 155.