                          T.C. Memo. 1995-474



                     UNITED STATES TAX COURT



                 ADNAN AL KAISSY, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 20692-92.                  Filed October 3, 1995.


     Thomas M. Regan, for petitioner.

     John C. Schmittdiel, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION

     SCOTT, Judge: Respondent determined deficiencies in

petitioner's income tax and additions to tax for the years and in

the amounts as follows:
                                             Additions to tax
                               Sec.             Sec.          Sec.
Year       Deficiency       6653(a)(1)      6653(a)(1)(A) 6653(a)(1)(B)
1982        $20,694             --               --            --
1983         23,054             --               --            --
1984         21,788             --               --            --
                                                                1
1987          2,694             --             $135
1988            590            $30               --            --
1989            542             --               --            --

                               Sec.                Sec.              Sec.
Year                        6653(b)(1)           6653(b)(2)         6661(a)
                                                    2
1982                         $10,347                                 $5,174
                                                   3
1983                          11,527                                  5,764
1984                          10,894               4                  5,447
1987                            --                 --                   --
1988                            --                 --                   --
1989                            --                 --                   --
       1
            50   percent   of   the   interest   due    on   $2,694.
       2
            50   percent   of   the   interest   due    on   $16,124.
       3
            50   percent   of   the   interest   due    on   $18,722.
       4
            50   percent   of   the   interest   due    on   $14,437.


       The only issue in controversy is whether any part of the

underpayment of tax for the calendar years 1982, 1983, and 1984,

was due to fraud with the intent to evade tax.                     Petitioner lists

as a further issue whether the assessment and collection of a

deficiency is barred by section 6501(a)1 for the years 1982,

1983, and 1984.         Respondent on brief concedes that absent a

showing of fraud on the part of petitioner with respect to any

one of these years, assessment and collection of any tax for that

year is barred by the period of limitations, and petitioner

recognizes that if fraud is shown the period of limitations has


1
   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, unless otherwise
indicated.
                                - 3 -


not expired.   Respondent shows as an issue whether petitioner is

liable for the addition to tax for negligence or intentional

disregard of rules and regulations under section 6653(a)(1) for

each of the taxable years 1987 and 1988.    However, petitioner

introduced no evidence with respect to the addition to tax for

negligence for these years and has made no argument with respect

to such an issue on brief.   We, therefore, assume that petitioner

has conceded the addition to tax for negligence for each of the

calendar years 1987 and 1988.

                         FINDINGS OF FACT

     Some of the facts have been stipulated and are found

accordingly.

     Petitioner, who resided in Minnetonka, Minnesota, at the

time of the filing of his petition in this case, filed his

Federal income tax return, Form 1040, for each of the calendar

years 1982, 1983, 1984, 1987, 1988, and 1989.    Petitioner's

returns for each of the years 1982, 1983, 1984, 1987, and 1988

were prepared by a public accountant, June Myslajek.    Each of

these returns contained a Schedule C, Profit (or Loss) from

Business or Profession, showing petitioner as a professional

wrestler who operated under the name The Sheik.    On the returns

for each of the years 1982, 1983, 1984, 1987, and 1988 petitioner

claimed business expense deductions on Schedule C, including air

fares.
                                - 4 -


     Petitioner was born in Baghdad, Iraq.      In 1956 petitioner

came to the United States to attend the University of Houston,

Texas, on an athletic scholarship.      In 1957 petitioner

transferred to Oklahoma State University of Agriculture and

Applied Science on a wrestling scholarship.      He remained at

Oklahoma State University until the fall of 1960 when he

transferred to Portland State College, Portland, Oregon.       Other

than one course taken at the University of Hawaii in 1961,

petitioner completed his undergraduate education at Portland

State College and received his B.S. degree in social science on

June 10, 1962.    In 1964 petitioner received his master's degree

in education from the University of Oregon.

     While in Portland, petitioner began wrestling professionally

under the name Billy Whitewolf.    Between 1964 and 1969 petitioner

continued his professional wrestling in Portland, Oregon, and

Hawaii.    In 1969 petitioner returned home to Baghdad, Iraq.     He

returned to the United States in 1975 and began wrestling for the

World Wrestling Federation.    In 1981 petitioner moved to

Minnesota to wrestle for the Minneapolis Boxing and Wrestling

Club (MBWC) and affiliated clubs.    At that time he began to

wrestle under the name The Sheik.    He continued to wrestle under

the name The Sheik throughout the years here involved.       During

the years here in issue MBWC was owned and operated by Mr. Vern

Gagne.    The Salt Lake City Wrestling Club, Bay Area Allstar
                               - 5 -


Wrestling, Chicago Wrestling Club, Nevada Wrestling Club, Inc.,

and Phoenix Wrestling Club were affiliated with MBWC, and the

group will hereinafter be referred to as the Gagne organizations.

The Gagne organizations treated petitioner for income tax

purposes as an independent contractor and shortly after yearend

furnished him with Forms 1099 purporting to show the compensation

paid to him during the taxable year.    For the year 1982, the

Forms 1099 furnished to petitioner showed that he received

$58,369 from MBWC, and amounts ranging from $5,450 down to $2,550

from three of the affiliated clubs.    In 1983 the Forms 1099

issued to petitioner showed that he received $41,815 from MBWC,

$12,050 from the Chicago Wrestling Club, and amounts ranging from

a high of $5,550 to a low of $3,650 from the three other

affiliated wrestling clubs.   For 1984 the Forms 1099 issued to

petitioner showed that he received $48,044.88 from MBWC, and

$11,660 from the Chicago Wrestling Club, and amounts ranging from

a high of $3,425 to a low of $2,550 from the other three

affiliated wrestling clubs.

     During the years 1982, 1983, and 1984 petitioner also

wrestled for the Winnipeg Wrestling Club (also known as AM-CAN),

which was an additional member of the MBWC group.    In 1983 AM-CAN

issued a statement of fees, commissions, or other amounts paid to

nonresidents of Canada to petitioner showing that AM-CAN had paid

gross income to petitioner of $11,650 in that year.    During the
                                - 6 -


years 1981 through 1989 petitioner frequently wrestled for MBWC

or other Gagne organizations at matches which were far enough

removed in distance from Minnetonka, Minnesota, that airplane

travel was necessary.   Generally, the Gagne organizations made

the necessary air travel arrangements for petitioner and other

wrestlers who were to appear at an event.    In years prior to the

year 1981, the Gagne organization did not arrange for or pay for

the wrestlers' air travel.    The wrestlers arranged for and paid

for their own air travel.    Occasionally, wrestlers would not

arrive at the place where the wrestling event was to be held a

full hour ahead of the scheduled opening of the event.    Mr. Vern

Gagne was not pleased with the time of arrival of some of the

wrestlers and announced to a group of them in their dressing

rooms at one event prior to 1981 that MBWC was going to begin

arranging for the wrestlers' air travel, either by commercial

airlines or by chartered plane, and that MBWC would purchase the

tickets and see that the wrestlers were furnished with the ticket

to travel to the event.   At this time he stated that the cost of

the airplane tickets was going to be deducted from the gross

receipts for the performance before a division of those receipts

was made between the part the wrestlers would get and the part

the club would get, and, therefore, in effect the wrestlers would

still be paying a part of the cost of their air fare.    The amount

wrestlers as a group received from an event in which they
                                - 7 -


participated was determined by subtracting from the portion of

the gross proceeds of the event allocated to the club, the

wrestlers' television expenses, taxes, and air fare, where travel

was by air, and dividing the remainder between the wrestlers and

the club on a 30-70 or 35-65 percent basis.    Before the club

began obtaining the air transportation for the wrestlers, only

television costs and taxes were deducted from the gross proceeds

before the split.    The 30 to 35 percent of the club's adjusted

gross proceeds from a show allocated to the wrestlers would be

divided among the wrestlers performing at a certain event on a

basis determined by the club, which was primarily geared to the

view of the managers of the club as to which wrestlers had been

most instrumental in attracting the crowds that came to the

wrestling matches.

     Mr. Vern Gagne considered the deducting of the air

transportation costs from the gross take before splitting it

between the wrestlers and the club to be a fair arrangement,

whereby the wrestlers and the club each paid a proportion of the

air fare costs.

     From time to time, the wrestlers would discuss in the locker

rooms the fact that they were really paying for their own air

travel, since it "came off the top", so that the checks they

received from each wrestling event were less than they had been
                               - 8 -


before the Gagne organizations began arranging for the air

travel.

     The Gagne organizations often arranged air travel for the

wrestlers through a travel agency known as Adventure Travel, Inc.

Mary Ellen Marxen (Mrs. Marxen), who was the office manager of

MBWC during the years here in issue, generally made the

arrangements for the wrestlers' travel.    She would contact a

representative of Adventure Travel, Inc., to advise him of the

wrestling dates, the number of wrestlers who would be traveling,

and the names of the travelers.   The travel agency would then

make the necessary arrangements and obtain commercial air travel

tickets for the wrestlers.   When petitioner and other wrestlers

were to travel by regular scheduled commercial flight, the

airline tickets would be delivered to the Minneapolis office of

MBWC prior to the scheduled match, and either the wrestlers would

come and pick the tickets up at the Minneapolis office of MBWC,

or on some occasions the tickets would be mailed or otherwise

delivered to the wrestlers by a representative of MBWC.    The bill

for the wrestlers' air travel expenses where air travel was

arranged by the Gagne organizations was sent directly to and paid

by MBWC or another Gagne organization.    The bills submitted to

MBWC by Adventure Travel, Inc., identified each wrestler by name,

or show name, and listed the ticket price associated with the

trip.   When petitioner traveled by chartered plane, as he and
                               - 9 -


other wrestlers did on some occasions during the years here in

issue, the invoices for the cost of the chartered travel would be

submitted by the charter company directly to MBWC, and MBWC

arranged for and paid the cost of the chartered flights to

transport the wrestlers to the matches it had arranged.   Shortly

after the match had taken place, MBWC would receive a final

accounting of the receipts and expenses for each performance at

the hosting area and the percentage of the gross take that went

to MBWC.   Mrs. Marxen would prepare the draft and final show

sheets for MBWC.   After the final accounting, Mrs. Marxen would

supply the information as to the receipts, minus certain expenses

which included the transportation expenses by commercial airline

or chartered plane where such expenses were paid by MBWC, to Mr.

Vern Gagne or his co-promoter Mr. Wally Carbo, who would then

determine the payout to each wrestler.   First the percentage of

the receipts minus certain expenses, including transportation

expenses, to be paid to all the wrestlers in the particular show

was determined, and then the percentage of that determined by Mr.

Vern Gagne and Mr. Wally Carbo to be allocated to each wrestler

was determined based on their evaluation of the wrestler's

contribution to the production of the receipts.   After Mr. Vern

Gagne or Mr. Wally Carbo determined the amount to be paid to each

wrestler who participated in an event, Mrs. Marxen would prepare

payment checks to the wrestlers.   Sometimes a particular check
                               - 10 -


would include payment for more than one match.      If a wrestler had

requested an advance and it had been given, the advance would be

deducted from his portion of the payoff.

     The wrestlers who worked with MBWC were responsible for

arranging and paying for their own lodging, meals, and local

transportation expenses associated with out-of-town performances.

On some occasions, a wrestler working with MBWC would make his

own arrangements for regular commercial travel and pay for his

own ticket.   MBWC would usually reimburse the wrestler for

commercial air travel for which the wrestler had paid.      Such

reimbursements were included in the paychecks received by the

wrestlers, and would be noted on an adding machine tape which was

attached to the check, which would show also repayment of

advances or other items.

     During the years 1981 through 1983, petitioner kept a ledger

in which he would record his expenses, whether the expenses were

or were not, in his opinion, deductible.      During 1981 through

1983 Mrs. Lisa Baird (Mrs. Baird) did the detailed work of

keeping petitioner's ledger books.      Mrs. Baird was living with

petitioner during 1981 through 1983.      Petitioner would give

information to Mrs. Baird, and she would enter the information on

the ledger book record.    The records would show cost of travel,

meals, and other expenses.    Petitioner would give Mrs. Baird

receipts, copies of airline tickets, and other information
                              - 11 -


regarding his expenses on trips, and Mrs. Baird would merely

record the information as given to her in the ledger.    During the

period 1984 through 1987 the ledgers were kept in the same way by

petitioner's then wife, now Mrs. Beth Andrew McDaniel.

Petitioner followed the same system of giving information to his

then wife, which she entered in the ledger book record, as he had

followed with Mrs. Baird.

     Prior to moving to Minnesota in 1981, petitioner had H & R

Block prepare his Federal income tax returns.   He had never

prepared his own Federal income tax returns.    Some of the other

wrestlers referred petitioner to Mrs. June Myslajek (Mrs.

Myslajek), saying that she did the returns of some other

wrestlers.   Petitioner believed that Mrs. Myslajek had the

experience necessary to make out a proper Federal income tax

return for him.   When petitioner met with Mrs. Myslajek prior to

the due date of his 1981 return, he handed her the ledger book

record that Mrs. Baird had prepared under his supervision.     He

told Mrs. Myslajek that she could contact the Gagne organization

if she had any questions about his return.   Mrs. Myslajek told

petitioner that she prepared returns for many wrestlers and knew

how to prepare returns for wrestlers.   Petitioner sat with Mrs.

Myslajek while she prepared his return, and when it was

completed, he signed and filed the return.   This same method of
                              - 12 -


preparation of his return was followed throughout each of the

other years when Mrs. Myslajek prepared his return.

     Mrs. Myslajek in her testimony at the trial insisted that

petitioner's records were right since all wrestlers paid their

own air fare.   She stated that if the company had paid the air

fare and had not been reimbursed by the wrestlers, the company

should have shown it on the Forms W-2 issued to the wrestlers, or

at least on the Forms 1099.   She stated that it never occurred to

her to question that petitioner had paid the air fare or if it

had been paid by the club, that it had been included in the

amount reported on the Forms 1099, since she knew from making out

returns for wrestlers, including her brother-in-law, that the

club did not pay transportation expenses for wrestlers.    She

stated she knew that wrestlers paid all of their own

transportation expenses.   She stated that she had no reason to

call the offices of MBWC, since she believed that either

petitioner had paid the air fare expenses, or if the company had

paid any of them, the amount was included as a payment made on

behalf of petitioner on the Forms 1099.

     Among the records petitioner furnished to Mrs. Myslajek were

the Forms 1099, which were given to him by MBWC and its

affiliates.   These Forms 1099 did not include the amount of air

fare paid for airline tickets furnished to petitioner.    It was
                              - 13 -


from the Forms 1099 that Mrs. Myslajek obtained the receipts of

petitioner from his profession of wrestling.

     When the special agents of the Internal Revenue Service came

to petitioner's home to speak to him about his income tax returns

for the years here in issue, they asked to see various documents,

including receipts.   Petitioner volunteered to them the fact that

he had kept ledger book records and voluntarily produced those

ledger books to the special agents.    The special agents took the

ledgers, with petitioner's permission, copied them, and returned

them to petitioner.

     In the years 1981 through 1984 petitioner claimed deductions

for air fare in the amounts of $20,359, $32,050, $38,465, and

$29,086, respectively.   All air fares of petitioner in 1981 and

1983 had been paid entirely under the system described by MBWC,

and for 1982 and 1984 petitioner had otherwise paid only $659 and

$179.88, respectively, in air fares.   In 1985 petitioner claimed

a deduction for air fare expenses in the amount of $18,160, all

of which was for airline tickets furnished to him by MBWC under

the system hereinbefore described.

     On January 29, 1990, petitioner was charged with three

counts of violating section 7206(1) for filing false income tax

returns for each of the taxable years 1982, 1983, and 1984, based

on his claim of substantial air travel expense deductions for

those years to which he was not entitled, thereby understating
                              - 14 -


his adjusted gross income and his tax liability.   Subsequently,

petitioner pled guilty to the charge of violating section 7206(1)

for the year 1983 by knowingly filing a false income tax return

that "stated his air travel expenses were $38,465, * * * his

adjusted gross income was $17,503, whereas as he then and there

well knew and believed, he had no air travel expenses and his

adjusted gross income was $55,838, resulting in additional tax

due and owing of $14,050."   Petitioner, through his attorney and

the representative of the U.S. attorney handling the case,

entered into a plea bargain agreement.   When the case was called

and the court was informed of the plea bargain agreement,

petitioner stated that he had discussed his case with his lawyer

and wanted to enter the guilty plea to the year 1983 under the

plea bargain agreement.   Petitioner, at the hearing, stated that

he had made a mistake, but when informed by the U.S. attorney and

the judge that it was necessary that he say that he had claimed

the deductions for air fare that he had not paid knowing that he

was not entitled to claim the deductions, he so stated.

Petitioner was permitted to continue to travel out of State to

wrestling matches between the time he entered the guilty plea and

the date of sentencing.   The judgment and probation/commitment

order of the U.S. District Court was entered on May 4, 1990.    It

provided that:   "Imposition of sentence is suspended and the
                               - 15 -


defendant is placed on probation for THREE (3) years", fined

$5,000, and required to perform 100 hours of community service.

     The major adjustment made by respondent in the notice of

deficiency for the years 1982 through 1984 was to disallow the

air fare deductions claimed by petitioner and to assert the

addition to tax for fraud.    Certain other minor adjustments were

also made by respondent, not involving fraud, and other additions

to tax as set forth above were asserted.

                               OPINION

     The only controversy in this case concerns whether any part

of petitioner's understatement of his income tax for the years

1982, 1983, and 1984 was due to fraud with intent to evade tax.

If fraud is established, petitioner does not question

respondent's computation.    Absent fraud, petitioner claims that

the period for assessment and collection of tax had expired

before the time of the issuance of the notice of deficiency and,

therefore, assessment and collection of any deficiency are

barred.   Respondent does not question that, absent fraud,

assessment and collection of any deficiency for 1982, 1983, or

1984 are barred.

     Section 6653(b)(1) provides for an addition to tax of 50

percent of the underpayment if any part of any underpayment is

due to fraud.   Section 6653(b)(2) provides for a further addition

of 50 percent of the interest due under section 6601 upon that
                              - 16 -


portion of an underpayment of tax by a taxpayer which is

specifically attributable to fraud.

     The burden is on respondent to establish fraud by clear and

convincing evidence.   Sec. 7454(a); Rule 142(b).   Whether a

portion of the tax is due to fraud is a question of fact to be

determined from consideration of the entire record before the

Court.   Gajewski v. Commissioner, 67 T.C. 181, 199 (1976), affd.

without published opinion 578 F.2d 1383 (8th Cir. 1978).     Seldom

is the Commissioner able to produce direct evidence of a

taxpayer's fraud, since fraud by its very nature is a question of

a taxpayer's intent.   However, the Commissioner may prove

fraudulent intent through circumstantial evidence.    A taxpayer's

entire course of conduct may be considered in determining whether

fraudulent intent exists.   Rowlee v. Commissioner, 80 T.C. 1111,

1123 (1983).   The often-cited case of Bradford v. Commissioner,

796 F.2d 303, 307 (9th Cir. 1986), affg. T.C. Memo. 1984-601,

lists as some of the "badges of fraud":   (1) Understatement of

income; (2) inadequate records; (3) failure to file tax returns;

(4) implausible or inconsistent explanations of behavior; (5)

concealing assets; and (6) failure to cooperate with tax

authorities.   Although the factors listed in the Bradford case

are always considered, the record as a whole must be reviewed by

the Court in determining whether the Commissioner has shown fraud

by clear and convincing evidence.   The only item listed in the
                               - 17 -


Bradford case as indicating fraud which is present in the instant

case is the understatement of income.    Here, the understatement

of income results from petitioner's taking an improper deduction.

All petitioner's receipts of income were reported in his gross

income on his returns for each of the years here in issue.

Respondent makes some arguments that certain items reported by

petitioner were reported in an improper manner, but does not have

any fraud contention based on underreporting of receipts by

petitioner.    Respondent questions the type of the records

petitioner kept.    Petitioner's records were incorrect in that

they had shown airline tickets purchased by MBWC as part of his

expense, but otherwise were reasonably good records for an

individual to keep.    The controlling question here is whether

respondent has shown by clear and convincing evidence that

petitioner claimed the deductions for air fares on his tax

returns knowing that he was not entitled to claim the deductions,

and intending by claiming those deductions to evade a tax he knew

to be owing.    From the evidence as a whole, we conclude that

respondent has failed to show that petitioner was aware that he

was not entitled to claim the air fare deductions, and has failed

to show any intent by petitioner to evade tax by claiming these

deductions.

     Petitioner took all his records to a return preparer for

preparation of his return.    This return preparer did not question
                                - 18 -


how the air fare was paid and did not check with petitioner's

"employer" or discuss with petitioner the expenses he was

entitled to deduct.   She stated in her testimony at trial that

she had no conversation with petitioner when she was preparing

his return with respect to whether he was entitled to deduct

expenses for airline tickets.    She stated that she did not have

such a discussion, because--

     these wrestlers were not getting reimbursed all those
     years. They were not getting reimbursed according to
     what I know. They were not getting reimbursed. * * *
     these wrestlers always paid their own expenses * * * it
     never occurred to me to ask him that [whether the cost
     of the airline tickets had been included on the Forms
     1099 furnished him by MBWC]. * * * if a salesman came
     to me * * * I would ask him. They are different than
     wrestlers are, but I would ask a wrestler too, but they
     never did get reimbursed.


When this testimony of petitioner's return preparer is considered

in the light of the rest of the evidence in this record, it is

reasonable to infer that petitioner considered that his return

preparer had approved the way in which he was handling his

deductions for air fare on his return.

     The record shows that in an economic sense a portion of the

airline fares was paid by the wrestlers.   The amount a wrestler

got from a show was computed by taking a certain percent (usually

30 to 35 percent) of the gross amount received by the club for

putting the show on, after deductions of television costs, taxes,

and the transportation of wrestlers, where that was paid, and
                              - 19 -


prorating it among the wrestlers.   As the owner of MBWC

testified, this split the cost of airline transportation between

the club and the wrestlers.   When the wrestlers had paid for

their own transportation, there was no deduction from gross

receipts for transportation prior to the split between the club

and the wrestlers.   Therefore, the wrestlers each received more

from the receipts of the show than they did after the club paid

the airline ticket costs or chartered plane costs and deducted

it, as the wrestlers say, "off the top" of the take before its

division between the wrestlers and the club.   In the economic

sense, the wrestlers paid a part of their own airline

transportation by receiving less for wrestling at performances

when they went by airplane than they would have received had the

club not furnished them with the airline tickets.   Petitioner's

return preparer was convinced that if the club had paid out the

amount for the airline tickets as the club manager testified, the

amount should have been shown on the Forms 1099 furnished to the

wrestlers as part of payment in money or in kind to the wrestlers

for the year.   Whether or not she is correct in her conclusion

that the amount paid by MBWC for air fare should have been

included on the Forms 1099, there is certainly much to be said

for her position that it should have been.   Many people do not

understand the concept that a deduction cannot generally be taken

for something where an equivalent amount has not been included in
                              - 20 -


income under circumstances such as those here present.   Had the

Forms 1099 reported the payments by the MBWC for airline tickets,

a deduction for the amount of the cost of the tickets which were

used for a business purpose of being transported to the shows

might have been proper for each wrestler.   The record as a whole

shows that many, if not most, of the wrestlers considered that

they were paying for the airline tickets, since the cost of the

tickets was deducted from the gross receipts from the show before

the proration of their percentage of the gross receipts among the

various wrestlers who performed at the show.   The record shows

that from time to time this fact was discussed by the wrestlers

in their locker rooms or during their trips.   Under these facts,

it appears plausible that petitioner could have considered that

he paid for the airline tickets that were furnished him by MBWC

and was, therefore, entitled to deduct the cost of the tickets as

an expense.   While persons accustomed to tax law understand the

concept that an item paid for a person but not included in that

person's income is not deductible, it is not uncommon for people

not familiar with tax law to fail to understand this concept.

This factor, combined with the confidence petitioner placed in

his return preparer, and her certainty that wrestlers paid their

own expenses, which must in some way have been intimated to

petitioner during the preparation of his return, negates fraud by

petitioner in claiming the deductions for air fares.
                               - 21 -


     Much of this record supports a basis for petitioner to

believe that he had paid for the airline tickets.    Respondent

argues that petitioner's return preparer contradicted

petitioner's statement that when he first came to her, he told

her that she could contact the Gagne organization if she had any

questions.   The portion of the transcript respondent cites for

this contention does not support respondent's argument.    When the

return preparer was asked whether she remembered what the

taxpayer said to her when he gave her the expense logs, her

answer was no.   And she was then asked:   "Do you remember what he

said when he asked you to prepare his return?"    The answer was:

"No; it was nothing special, he just probably said good morning,

or good afternoon."    The other citation given by respondent was

the answer to the question "Do you remember him asking you to

verify any of the information that was set out in these logs?"

The answer was, "Asking me to verify it, no".    When the Court

asked the return preparer to be more precise, she said:    "Did he

ask me to verify it.   What do you mean by that question?"

Instead of explaining, respondent's attorney asked whether when

petitioner presented information to her, he asked her to

determine whether it was correct or not.   She answered:   "No, he

didn't".   This testimony does not support respondent's contention

that petitioner did not inform the return preparer that the Gagne

organization could be called if she had questions.
                              - 22 -


     Petitioner voluntarily furnished his logs to the special

agents.   The fact that these logs were voluntarily furnished is

an indication not only of cooperation by petitioner, but also an

indication that petitioner did not know that the logs were not

accurate.   Respondent argues that petitioner may have believed

the notebook logs would satisfy the special agents of the

accuracy of his return, even though he knew the return to be

false and, therefore, that petitioner produced the logs and

permitted the special agents to photocopy them, but he must have

realized his mistake in doing this when he asked the following

day for their return.   It is difficult to follow this argument,

since petitioner was aware when he asked for the return of the

logs that they had been copied by the special agents.   Returning

the logs would in no way take away the information furnished to

the special agents.

     Respondent argues that at times petitioner stated that he

prepared the logs, and at other times that they were prepared by

Ms. Baird, and later prepared by his ex-wife.   The Court sees

nothing misleading about these statements, since the record is

clear that petitioner furnished the information and, where

needed, assisted in how it went into the logs, and the actual

writing was done by Ms. Baird, and his ex-wife.   He even

explained why the two women did the actual writing by saying

their handwriting was better than his.
                               - 23 -


     Respondent contends that even if petitioner's return

preparer was negligent in the way she handled the preparation of

his return, this fact does not excuse petitioner's willfulness to

deceive.    However, the question is whether respondent has shown

by clear and convincing evidence that petitioner was attempting

fraudulently to deceive in order to evade tax.      The fact that he

would be led by a return preparer to believe that he had done all

that he had needed to do and his returns would be accurately

prepared, goes to the question of his intent to evade tax.     In

our view, the only evidence respondent has produced in this case

that the claiming of these deductions was other than a mistaken

belief that the amounts were deductible is the statements

petitioner made when he pled guilty to count 2 of the indictment

alleging that he had filed a false return for 1983 by deducting

the cost of air transportation that he knew he was not entitled

to deduct.    Respondent points out that at the hearing on

petitioner's guilty plea, the court asked petitioner:     "Well, the

point is, did you know you were cheating when you had some

$38,000 in air expenses", and petitioner answered, "Yes, your

honor".    The court asked, "You knew that", and petitioner

answered, "Yes".    The court stated:   "So you did something wrong

and you appreciate that".    Petitioner answered:   "Yes your honor,

I did something wrong, you are right."    The Court then asked:

"No question about it, huh?"    And the answer was, "Yeah".   This
                              - 24 -


followed statements made by petitioner that he had made a mistake

in the way he handled the airline fares and the court's pointing

out to him that he must not only plead guilty, but must state

that he understood what he was doing, had consulted his attorney,

and understood the charges against him, and he must answer

questions that showed he understood that he was guilty.   The

transcript of the guilty plea as a whole is not clear that

petitioner testified that at the time of the filing of his return

he knew that it was wrong to claim the deductions for airline

expenses.   This is really the issue, not whether later petitioner

learned, and now knows, that the claiming of these expenses was

wrong.   Although the person representing the U.S. attorney's

office and the court made it clear to petitioner that he would

have to admit knowing that the claiming of these expenses was

wrong, and he did admit that, never does it appear clearly that

he departs from his statement of making a mistake and intends to

be saying that he knew at the time he filed his returns that what

he did was wrong.   There is, of course, by pleading guilty, the

inherent admission that he violated the provisions of section

7206(1), which provides that any person who willfully makes and

subscribes any return which contains or is verified by

declaration that it is made under penalty of perjury, and "which

he does not believe to be true and correct as to every material

matter" is guilty of a felony.   However, the conviction under
                              - 25 -


this section does not establish that a portion of the

underpayment by petitioner in the year involved is due to fraud

with intent to evade tax under section 6653(b).   Wright v.

Commissioner, 84 T.C. 636 (1985).   As we stated in the Wright

case 84 T.C. at 643-644, a conviction for willful falsification,

under section 7206(1), while not dispositive, will be one of the

facts to be considered in a trial on the merits of a case.

However, there remained in Wright a genuine issue of material

fact as to whether the reason for the underpayments was an

attempt to evade taxes.   We stated that the issue of intent,

adequately raised by the taxpayer in that case, was clearly one

requiring a trial on the merits.

     Here, we have considered petitioner's conviction on a plea

of guilty to a violation of section 7206(1) with respect to his

1983 return, but have concluded that this evidence alone is not

sufficient to be clear and convincing that a part of the

underpayment of tax for 1983 was due to fraud with intent to

evade tax.

     While petitioner attended college for some years, and even

ultimately received a master's degree in education, he primarily

was an athlete during his college years, and did not have courses

that would qualify him to have a complete understanding of

business and tax matters.   His business associates were other

wrestlers.   The wrestlers understood that from an economic
                              - 26 -


standpoint, at least partially, they were paying for their

airline tickets, but there is nothing to indicate that they

understood because of the nature or the manner in which payment

was made for those tickets, or from the fact, if they knew, that

the value of the tickets was not included on the Forms 1099

furnished to them, that they were not entitled to claim a

deduction for the airline tickets.     Certainly, there is no clear

and convincing evidence to the effect that petitioner did

understand this fact.   We hold that respondent has failed to show

by clear and convincing evidence that any part of the

underpayment of tax for any of the years 1982, 1983, or 1984 was

due to fraud with intent to evade tax.

     Since there are years involved other than the years 1982

through 1984,



                                           Decision will be entered

                                     under Rule 155.
