                        T.C. Memo. 1995-462



                      UNITED STATES TAX COURT



                  LESLIE R. BARTH, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 11610-91.            Filed September 27, 1995.



     Leslie R. Barth, pro se.

     Elise Frost Alair, for respondent.


             MEMORANDUM FINDINGS OF FACT AND OPINION

     COHEN, Judge:   In a statutory notice sent March 7, 1991, to

Leslie R. Barth (petitioner) and Terry E. Barth (Ms. Barth),

respondent determined deficiencies and additions to tax as

follows:
                                 - 2 -

                                            Additions to Tax
          Year          Deficiency            Sec. 6653(b)

          1976           $136,503               $68,252
          1978            109,645                55,317
          1979            173,243                86,622
          1980            191,834                95,917


In a separate statutory notice sent March 7, 1991, to petitioner,

respondent determined a deficiency of $152,448 in petitioner's

Federal income taxes and additions to tax of $76,244 under

section 6653(b) and $5,425 under section 6654 for 1977.     Unless

otherwise indicated, all section references are to the Internal

Revenue Code in effect for the years in issue, and all Rule

references are to the Tax Court Rules of Practice and Procedure.

     Petitioner and Ms. Barth filed separate petitions.     Her case

was docketed as No. 11150-91.    After a consolidated trial,

respondent entered into a stipulated decision with Ms. Barth in

which it was agreed that there are no deficiencies in or

additions to tax due from her.    The issue remaining for decision

is whether petitioner is liable for the additions to tax for

fraud.   The deficiencies and the addition to tax under section

6654 determined by respondent are decided against petitioner by

reason of his failure properly to prosecute this case; the

reasons for that action are discussed below.


                         FINDINGS OF FACT

     Some of the facts have been stipulated, and the stipulated

facts are incorporated in our findings by this reference.
                               - 3 -

Petitioner resided at the Federal Correctional Institute in

Danbury, Connecticut, at the time that his petition was filed.

     Petitioner graduated from the Wharton Business School at the

University of Pennsylvania in 1957 and from Harvard Law School in

1960.   Between 1960 and 1964, petitioner was employed by the

office of Tax Legislative Counsel, U.S. Department of the

Treasury; served with Army Intelligence; and was employed by the

accounting firm of Touche, Ross & Co.   In 1964, petitioner

commenced the private practice of law in a partnership that later

became a professional corporation (Bergman & Barth).   Bergman &

Barth specialized in tax matters, estate planning, pensions, and

corporate planning.   Petitioner was the managing partner and

prepared the tax returns for Bergman & Barth.   (He was admitted

to the U.S. Tax Court bar May 5, 1970.)

     An agreement dated July 29, 1976, under which Bergman &

Barth bought petitioner's shares in that firm included the

following terms:


          2. Buyer agrees to pay Barth [petitioner] for
     said shares of capital stock the principal sum of One
     Hundred Thousand ($100,000.00) Dollars in manner and
     form as follows:

               a. One Hundred Thousand ($100,000.00)
     Dollars thereof at the Closing hereinafter described in
     manner and form as set forth in Schedule A attached.

          3. Buyer agrees to pay Barth deferred
     compensation in the amount of Two Hundred Fifty-one
     Thousand One Hundred Twenty Dollars and Forty-nine
     Cents ($251,120.49) and Barth agrees that he will
     report said sum as earned income when paid on his
                               - 4 -

     proper income tax return and the Buyer agrees it will
     issue a timely form 1099. Such amount shall be paid in
     manner and form as follows:

               a. Two Hundred Fifty-one Thousand One
     Hundred Twenty Dollars and Forty-nine Cents
     ($251,120.49) thereof at the Closing hereinafter
     described in manner and form as set forth in Schedule B
     attached.


During 1976, petitioner received checks totaling $351,150.19 from

Bergman & Barth.

     On or about March 1, 1976, petitioner began to practice law

under the name Leslie R. Barth, Associates, P.C. (the law firm).

Petitioner was the sole owner of the law firm, although the name

was changed on or about June 1, 1978, to Barth & Richheimer, P.C.

During each of the years in issue, petitioner provided clients

with legal advice on Federal income tax matters.

     During the years in issue, petitioner conducted business

through a variety of corporations and other entities controlled

by him.   The law firm and other entities controlled by petitioner

issued checks to petitioner, to Ms. Barth, and to other entities

or accounts controlled by petitioner in the following amounts:
       Year                    Amount

            1976                 $207,924.71
            1977                  258,696.39
            1978                  181,358.00
            1979                  403,443.61
            1980                  331,964.57


Funds withdrawn by petitioner from the various accounts were used

for personal purposes during the years in issue.
                                - 5 -

     During the years in issue, petitioner maintained a home in

Fairfield, Connecticut, that had 16 rooms and was situated on

10.6 acres of land.   Petitioner acquired a collection of

automobiles.    As of 1979, petitioner maintained at his residence

in Connecticut no fewer than 10 automobiles, including a 1979

Rolls Royce, a 1977 Jaguar, two 1972 Ferraris, and 5 Mercedes

ranging from the 1971 model to a 1979 model.     Petitioner

registered a 1975 Pontiac in his name, but all of the other

automobiles were registered in the name of International

Automobiles, Ltd., an entity that purported to be a business

conducted by petitioner or by petitioner and Ms. Barth as

partners, but which conducted little or no actual business

activity.

     During the years in issue, petitioner submitted financial

statements to various institutions.     On financial statements

dated September 29, 1977, October 10, 1978, and April 19, 1979,

petitioner represented that his compensation from his law firm

was $225,000.   On two financial statements dated September 19,

1980, he represented that his compensation from the law firm was

$250,000.   In March 1980, petitioner signed a Form 1120S, U.S.

Small Business Corporation Income Tax Return, for his law firm.

That return showed petitioner's compensation as $700,000.

Petitioner, however, did not file that return.

     Petitioner did not file timely Federal income tax returns

for the years in issue for himself, for the law firm, or for
                               - 6 -

other entities with which he was involved.   On July 9, 1980, he

filed an individual joint return for 1976.   Petitioner did not

file a Federal income tax return for 1977.   No later than 1982,

the Internal Revenue Service (IRS) commenced an investigation of

petitioner.   On April 3, 1986, petitioner pleaded guilty to

failure to file his personal income tax return for 1979 in

violation of section 7203.   On May 19, 1986, he filed individual

joint returns for 1978, 1979, and 1980 in order to receive

favorable consideration at the time of sentencing on his

conviction.

     In late 1979 or early 1980, attorneys for petitioner

employed William Lipton (Lipton), who was then a partner at the

accounting firm of Ernst & Whinney, to prepare petitioner's

Federal tax returns for 1978, 1979, and 1980.   For approximately

3 years, Lipton attempted to reconstruct for petitioner books and

records in order to prepare returns.   The records, however, were

in terrible shape, consisting of nothing but check stubs and

canceled checks.   Brian Onofrio (Onofrio), an employee of

petitioner, also attempted to reconstruct petitioner's records in

order to prepare tax returns for the years in issue.   Richard

Timbie (Timbie) was one of several lawyers representing

petitioner in relation to his failure to file returns.

     Petitioner's return filed for 1976 reported adjusted gross

income of $4,315.86.   He claimed a loss from the law firm as a

subchapter S loss and did not report the income received from
                                - 7 -

Bergman & Barth.   Petitioner's returns for 1978, 1979, and 1980

reported adjusted gross income of $69,434, $21,773, and $126,685,

respectively.   Attached to each return, on the advice of Timbie,

was a statement that the income reported on the return did not

include amounts "withdrawn by the taxpayer from this law firm and

other related entities.   Those withdrawals were contemporaneously

recorded as loans and were repaid by the taxpayer in the taxable

year or in subsequent years."   The amounts thus excluded from

taxable income reported on the returns were $174,300 for 1978,

$282,900 for 1979, and $83,600 for 1980.

     No loan documents were ever prepared or executed by

petitioner.   The amounts claimed to be loans were reconstructed

from notes on check stubs, and no records showing actual

repayments were maintained.   On the financial statements that he

submitted during the years in issue, as set forth above,

petitioner did not disclose any loans due to the law firm or his

other entities.

     After examination of the returns belatedly filed by

petitioner, respondent determined that petitioner had additional

compensation, interest, and other income for the years in issue.

For 1976, respondent determined that no election was filed to

qualify the law firm as an S corporation and that it had not been

established that any deductible loss was sustained.   The net

adjustments determined by respondent increased petitioner's

income by $306,673 for 1976, $226,905 for 1978, $396,008 for
                                - 8 -

1979, and $327,194 for 1980.   Respondent also determined that

petitioner had unreported taxable income of $238,640 for 1977.

From 1991 through 1995, petitioner failed to provide to

respondent any indication that these amounts were incorrect.

                               OPINION

     Before discussing our conclusions with respect to fraud, we

set forth the lengthy procedural history of this case.    That

history explains in part why we conclude that petitioner's

representations are not credible and why we determine the

deficiencies in issue against him by reason of his defaults.


                       Procedural History

     In his petition filed June 10, 1991, petitioner alleged that

all of respondent's determinations were in error.   As the facts

upon which he relied, he alleged:


          (A) At the present time, due to my incarceration
     at the Federal Correctional Institute Danbury,
     Route 37, Pembroke Station, Danbury, CT 06811, it is
     impossible for me to allege facts in support of my
     assignments of error as the necessary records and
     documents are not available to me. Upon my release, I
     will prepare an amended petition in order to comply
     with the Court's Rules.


Petitioner designated New York, New York, as the place of trial

for this case.

     Petitioner never sought leave to file an amended petition.

In the answer, respondent alleged, in support of the

determination that the underpayments of tax for the years in
                               - 9 -

issue were due to fraud, facts concerning petitioner's education

and employment; his failure to file timely returns; the omission

of substantial amounts of income on the returns that were

belatedly filed; and his failure to maintain, or to submit for

examination, complete and adequate books and records.   Petitioner

belatedly filed a reply, denying the allegations but not setting

forth any specific facts contradicting them.

     By notice served August 28, 1992, this case was set for

trial in New York on February 1, 1993.   On November 10, 1992,

petitioner filed a Motion for Continuance and a Motion to Change

the Place of Trial to Hartford, Connecticut.   In the Motion for

Continuance, petitioner represented that he was released from the

Federal Correctional Institute on August 22, 1991, and, since

then, had been attempting to obtain his records to prepare

properly for trial.   He also represented that he had been

attempting to accumulate sufficient funds to retain counsel.

Petitioner's motions were granted.

     By notice served January 6, 1993, the case was set for trial

on June 7, 1993, in Hartford, Connecticut.   On May 13, 1993,

petitioner filed a Motion for Continuance, representing that he

had been indicted by the United States on several counts of mail

fraud, that his mail fraud trial was scheduled to commence on

May 10, 1993, and that he was unable to prepare for trial in this

case during the mail fraud trial.    Respondent did not object, and

petitioner's motion was granted.
                              - 10 -

     By notice served January 5, 1994, this case was set for

trial in Hartford, Connecticut, on June 6, 1994.   On April 8,

1994, petitioner filed a Motion for Continuance.   Petitioner

represented that he was in the process of seeking to set aside a

guilty verdict entered against him in the mail fraud case and

that, therefore, he could not prepare for trial of this case.

     On April 18, 1994, respondent filed a Motion to Compel

Production of Documents, and, on April 25, 1994, respondent filed

a Motion to Compel Responses to Respondent's Interrogatories.

Respondent's Motion to Compel Production of Documents was

granted, and petitioner was ordered to produce the documents on

or before May 6, 1994.   Respondent's motion with respect to

interrogatories was granted, and petitioner was ordered to

respond to the interrogatories on or before May 16, 1994.     The

motions were set for hearing with respect to sanctions on June 6,

1994.

     Meanwhile, on April 28, 1994, Ms. Barth filed a Motion to

Consolidate this case with her case.   That motion was granted

May 3, 1994.   In a subsequent telephone conference call among the

parties and the Court, the Court indicated that petitioner's

Motion for Continuance would be granted only if he cooperated

with respondent with respect to the stipulation of facts and

responded to the outstanding discovery.   Thereafter, Ms. Barth

moved for a severance of the cases, representing that her
                              - 11 -

psychological health required that she seek immediate resolution

of the innocent spouse and duress issues that she had raised.

     When the cases were called for trial on June 6, 1994,

respondent filed a Motion for Sanctions against petitioner,

reporting on petitioner's failure to comply with the outstanding

Court orders.   Ms. Barth's Motion for Severance was denied, and

the cases were set for trial June 13, 1994.

     On June 13, 1994, the First Stipulation of Facts was filed.

Trial commenced with respect to the issues raised by Ms. Barth.

Witnesses who testified on June 13 and 14, 1994, included

petitioner, Lipton, and Timbie.   On June 14, 1994, petitioner was

directed to answer the interrogatories by September 12, 1994.

The Court advised the parties that the trial would be resumed in

the spring of 1995, probably in New York City, which petitioner

had identified as his then current center of activity.   The

parties were directed to file a joint written status report on or

before October 11, 1994, and petitioner's Motion for Continuance

was granted with respect to further trial at a time and date to

be set after the filing of the joint written status report.

     On October 14, 1994, a status report was filed by Ms. Barth

and respondent.   Respondent reported that petitioner had

responded to the interrogatories but that a further conference

was necessary to draft a second stipulation of facts and to

develop further the cases for trial.
                              - 12 -

     By Order served November 4, 1994, the cases were set for

trial in New York City on April 3, 1995.   The parties were

ordered to submit on or before March 3, 1995, trial memoranda

setting forth a discussion of the issues remaining to be tried

and the legal authorities relied on by the parties, identifying

each witness to be called at trial with a brief summary of the

anticipated testimony of such witness, and other matters.     The

Order stated:   "Witnesses who are not identified in the trial

memorandum will not be permitted to testify at the trial without

leave of the Court upon sufficient showing of cause."   The

requirement of the trial memorandum had been included in the

Standing Pre-Trial Order served with each prior notice of trial,

but petitioner never submitted a trial memorandum.

     The Order served November 4, 1994, also required the filing

of a stipulation of facts on or before March 3, 1995.   Ms. Barth

and respondent entered into a Second Stipulation of Facts,

attaching a variety of records showing receipt by petitioner of

amounts determined by respondent to be unreported income and

attaching various tax returns filed for entities controlled by

petitioner over a period of time.   Petitioner failed to cooperate

with respondent and Ms. Barth's counsel with respect to this

stipulation of facts.

     On December 5, 1994, respondent's request for admissions was

filed, reflecting service on petitioner on December 2, 1994.

Petitioner did not respond to the request for admissions.
                               - 13 -

     In early January 1995, in a telephone conference call among

the parties and the Court and Stephen R. Field (Field), an

attorney for petitioner who had not entered his appearance in

this case, petitioner requested a continuance for the purpose of

employing Field to represent him.    The Court advised petitioner

that no continuance would be granted in view of the history of

this case.

     The case was called for trial on April 3, 1995, in New York

City.    Respondent filed a Motion for Sanctions and a Motion to

Dismiss for Failure Properly to Prosecute.    The Second

Stipulation of Facts executed by respondent and Ms. Barth was

filed.    Petitioner arrived late and filed a Motion for

Continuance based upon the pendency of an appeal from his mail

fraud conviction.    His Motion for Continuance was denied, and the

Court stated that respondent's motions would be granted with

respect to the deficiencies.    The Court indicated that the trial

would proceed with respect to the fraud issues and those issues

involving Ms. Barth.    The Court advised petitioner that he could

testify but that he could not call any other witnesses because of

his failure to file a trial memorandum or to have present those

witnesses.    Petitioner thereafter testified that he would have

called Timbie and Onofrio as witnesses, but he admitted that he

had not taken any steps to produce them for the trial.

     Petitioner represented that he intended to employ Field as

his attorney by April 30, 1995, and that he was in consultation
                               - 14 -

with Field about his testimony in this case.     The Court advised

petitioner that he could move to set aside the defaults

previously declared and that cooperation with respect to the

second stipulation of facts and his testimony might help him in

that regard.   Petitioner then indicated that most of the items

set forth in the second stipulation of facts were agreeable.    At

no time during his testimony, however, did petitioner show any

error or suggest any specific error in respondent's determination

with respect to the deficiencies.

     On April 5, 1995, the case was submitted.    Petitioner was

advised that he had until May 5, 1995, to make any motions to be

relieved of his prior defaults, to vacate admissions, or to

strike any exhibits to which a valid evidentiary objection could

be made.   The Court stated:


     you must include a detailed offer of proof, including
     copies of any documents that you would offer in
     evidence such as transcripts of prior testimony and a
     summary of the anticipated testimony that you or any
     other witness could give at any further trial if the
     record were reopened.

          You're certainly going to have to show good cause,
     and I frankly doubt it, because on the basis of the
     history so far, I've drawn the inference that you had
     never any intention to prosecute this case, but only to
     delay it. But if you--I do have to consider any such
     motions with regard to the interest of justice, and
     you're obviously going to have to offset any prejudice
     to the Court, to Respondent and to Mrs. Barth from the
     delays and from not resolving it at that point.
                              - 15 -

The Court directed that, in the absence of an order granting any

subsequent motions by petitioner, simultaneous opening briefs

were due from the parties July 5, 1995, and answering briefs were

due August 21, 1995.

     On May 8, 1995, petitioner filed a Motion for

Reconsideration of Default Judgment and New Trial and Offers of

Proof.   Petitioner offered no excuse for his prior failures to

comply with Court Orders or to proceed to trial, had not as of

that time employed counsel, and merely represented that he was

"prepared to contact respondent in the ensuing week to discuss a

possible third stipulation of facts."   Petitioner's Offers of

Proof consisted of a statement of his intention to call Timbie,

who would give his opinion that the returns were prepared "in

accordance with the provisions of the applicable Internal Revenue

Code and applicable regulations" and Onofrio, who would testify

that he had access to petitioner's records and would give the

same opinion.   Further, according to the offer of proof, the

witnesses would testify that petitioner did not intend to

misstate or misrepresent his income.

     Because the proffered testimony of Timbie and Onofrio was

primarily inadmissible opinion, was inconsistent with the

testimony previously given by Timbie and Lipton, and was not

sufficient to comply with the Court's direction, petitioner's

motion for reconsideration was denied May 22, 1995.   Petitioner

failed to file the briefs ordered by the Court.
                                - 16 -

                            Discussion

     Petitioner has attempted to delay this proceeding

indefinitely, without any indication that he has additional

evidence to present on the merits of the deficiencies.    The

documents received in evidence and petitioner's admissions

support respondent's determinations of substantial amounts of

unreported income, refute the contention on petitioner's

belatedly filed returns that cash received by him during the

years in issue constituted loans, and contain no suggestions that

petitioner is entitled to deductions not previously allowed.

During the 5 years from the time that his returns were filed and

the additional 4 years that this case has been pending,

petitioner has failed to specify errors in respondent's

determinations of the amounts of his unreported income.    We are

satisfied that no injustice has resulted from our determination

that he is liable for the deficiencies determined by respondent.

     During trial, we cited to petitioner, and he acknowledged

familiarity with, our opinion in Brooks v. Commissioner, 82 T.C.

413 (1984), affd. without published opinion 772 F.2d 910 (9th

Cir. 1985).   He was thus well aware that his failure to proceed

as ordered by the Court would ultimately lead to resolution of

these issues against him, but he made no attempt to comply.

Respondent's motion to dismiss shall be granted under Rules 123,

142(a), and 149(b).   See Brooks v. Commissioner, 82 T.C. at 422-

430, and cases cited therein.
                               - 17 -

     Petitioner also has the burden of proof with respect to the

addition to tax under section 6654 for 1977.   That addition to

tax is mandatory, absent exceptions not shown to exist here.

Grosshandler v. Commissioner, 75 T.C. 1, 20-21 (1980).

Respondent's determination in that regard must also be sustained.

     The addition to tax in the case of fraud is a civil sanction

provided primarily as a safeguard for the protection of the

revenue and to reimburse the Government for the heavy expense of

investigation and the loss resulting from the taxpayer's fraud.

Helvering v. Mitchell, 303 U.S. 391, 401 (1938).   Respondent has

the burden of proving, by clear and convincing evidence, that

some part of an underpayment for each year was due to fraud.

Sec. 7454(a); Rule 142(b).   This burden is met if it is shown

that the taxpayer intended to evade taxes known to be owing by

conduct intended to conceal, mislead, or otherwise prevent the

collection of such taxes.    Stoltzfus v. United States, 398 F.2d

1002, 1004 (3d Cir. 1968); Webb v. Commissioner, 394 F.2d 366,

377 (5th Cir. 1968), affg. T.C. Memo. 1966-81.

     The existence of fraud is a question of fact to be resolved

upon consideration of the entire record.   Gajewski v.

Commissioner, 67 T.C. 181, 199 (1976), affd. without published

opinion 578 F.2d 1383 (8th Cir. 1978).   Fraud will never be

presumed.   Beaver v. Commissioner, 55 T.C. 85, 92 (1970).     Fraud

may, however, be proved by circumstantial evidence because direct

proof of the taxpayer's intent is rarely available.   The
                              - 18 -

taxpayer's entire course of conduct may establish the requisite

fraudulent intent.   Stone v. Commissioner, 56 T.C. 213, 223-224

(1971); Otsuki v. Commissioner, 53 T.C. 96, 105-106 (1969).

     The failure to file tax returns, without more, is not

conclusive proof of fraud; such omission may be consistent with a

state of mind other than the intention and expectation of

defeating the payment of taxes.   Stoltzfus v. United States,

supra; Cirillo v. Commissioner, 314 F.2d 478, 482 (3d Cir. 1963),

affg. in part and revg. in part T.C. Memo. 1961-192; Kotmair v.

Commissioner, 86 T.C. 1253 (1986).     Failure to file, however, may

be considered in connection with other facts in determining

whether an underpayment of tax is due to fraud.

     Petitioner's return for 1976 was filed 3 years late.    He did

not file a return for 1977.   His returns for 1978, 1979, and 1980

were filed only after he was investigated by the IRS and in

relation to sentencing on his conviction under section 7203.

Because petitioner failed to maintain complete and accurate

records, his representatives could not prepare accurate returns.

Petitioner's training and experience and knowledge of the proper

way to keep books and records and report taxable income must be

considered.   Under these circumstances, we infer that the failure

to file returns and the failure to maintain records were intended

to conceal his income and avoid payment of taxes.    See Scallen v.

Commissioner, 877 F.2d 1364, 1370-1371 (8th Cir. 1989), affg.

T.C. Memo. 1987-412; O'Connor v. Commissioner, 412 F.2d 304, 310
                             - 19 -

(2d Cir. 1969), affg. on this issue and revg. T.C. Memo. 1967-

174; Grosshandler v. Commissioner, supra at 19-20.

     Petitioner's asserted during his testimony that he relied on

Lipton, Onofrio, and Timbie to prepare his tax returns.   With

respect to the purported loans, he testified:


     a significant portion of the proceeds that I received
     from the Bergman & Barth firm, which, in the aggregate,
     deferred compensation and capital gains, et cetera,
     aggregated close to $400,000, to the best of my
     knowledge, was rerouted, in other words, through the PC
     and other entities.

          In other words, loans were made by myself
     individually to the PC and to the other related
     entities from the proceeds that I realized on the
     Bergman & Barth sale. So that obviously if one were
     dealing with just the checks that were written to me,
     number one, they don't reflect rather significant
     loans, which I believe at least a significant part of
     the interest has been checked and allowed by the IRS.

          And, also, as I say, it doesn't reflect the good
     part of the $400,000 that got rerouted, in other words,
     through those accounts. So it was those analysis, in
     other words, that I went through with Mr. Timbie and
     with Mr. Onofrio, in other words, to present the
     clearest picture. And the main point of focus that
     Mr. Timbie had with respect to the loans and I think
     which lead to the statements being attached to the
     returns was the issue in subsequent years, years
     subsequent to 1980.

          What happened was--let me take that back. What
     happened is in the early years, there was a credit
     balance running from the entities to me. In other
     words, I lent them more money than they lent me and
     they were repaying it. There was a time when it ran
     the other way, in other words, where I owed them and
     the matter ultimately was repaid in years subsequent to
     1980. The repayment years were primarily, I believe,
     1984 and 1985.
                              - 20 -

          So that at the time that the statement was made, I
     think--I don't recall the exact words, but it was
     indicated that amounts were advanced, in other words,
     which were repaid during the current year or in
     subsequent years.


This testimony does not in any way exonerate petitioner.

"Rerouting" funds received from Bergman & Barth would not make

them nontaxable.   To the contrary, petitioner's "rerouting"

transactions, in the context of the entire record of how he used

multiple entities and devices to minimize or avoid taxes, are

evidence of an intent to conceal income.    Petitioner's prior

admissions of income from the firm of at least $225,000 for each

of the years in issue, made on various financial statements,

belie the later claims that he received only loans and no

significant taxable income from the firm.    From petitioner's

statement that he "went through" the analysis with Timbie and

Onofrio, we infer that they simply accepted petitioner's

representations that certain amounts were loans.

     In this case, petitioner cannot hide behind his employment

of others belatedly to prepare his returns.    He did not provide

accurate, complete, or comprehensible records to the persons that

he employed to prepare the returns.    See Scallen v. Commissioner,

supra at 1371; Foster v. Commissioner, 391 F.2d 727 (4th Cir.

1968), affg. in part and revg. in part T.C. Memo. 1965-246;

Estate of Temple v. Commissioner, 67 T.C. 143, 162 (1976).
                              - 21 -

Moreover, by the time the returns were filed, the fraudulent acts

and omissions had already occurred.

     In assessing petitioner's offer of proof, we have considered

the testimony of Lipton and Timbie given in June 1994 in relation

to Ms. Barth's innocent spouse claim.    Petitioner was present and

objected to questions to Timbie concerning the records that he

had examined.   After those objections were overruled, Timbie

testified that he worked primarily from schedules prepared by

Lipton and Onofrio and recommended the statements attached to the

tax returns with respect to alleged loans.    Timbie did not see

any loan documents.   Although Onofrio testified during criminal

proceedings against petitioner, and petitioner was advised on

April 4, 1995, to submit Onofrio's prior testimony as part of his

offer of proof, petitioner failed to do so.

     The record is replete with clear and convincing evidence

that petitioner underpaid his tax in each of the years in issue,

and those underpayments are due to fraud.

     On consideration of the entire record,


                                      Respondent's motion to dismiss

                               for lack of prosecution will be

                               granted, and decision will be

                               entered for respondent.
