                                   T.C. Memo. 2014-4



                           UNITED STATES TAX COURT



                     MATT L. SEIFFERT, Petitioner v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 9379-10.                             Filed January 9, 2014.



      George W. Connelly, Jr., for petitioner.

      Sara W. Dalton, for respondent.



               MEMORANDUM FINDINGS OF FACT AND OPINION


      KROUPA, Judge: Respondent determined deficiencies in petitioner’s

Federal income tax for 1996 through 2001 (years at issue). We must decide

whether petitioner was entitled to deductions under section 1661 for purported bad


      1
          All section references are to the Internal Revenue Code for the years at
                                                                         (continued...)
                                         -2-

[*2] debts associated with a purported consulting activity that offset wage income.

We hold that petitioner was not. We must also decide whether petitioner failed to

report certain income for 1996, 1997 and 1998. We hold that he did not report

that income. We must also decide whether petitioner is liable for the fraud penalty

under section 6663. We hold that petitioner is liable.

                               FINDINGS OF FACT

      The parties have stipulated some facts. We incorporate the stipulation of

facts and accompanying exhibits by this reference. Petitioner resided in Texas

when he filed the petition.

I. Petitioner’s Employment and Dealings

      A. Petitioner’s Background

      Petitioner is an experienced and savvy businessman. Petitioner earned a

business administration degree from the University of Houston in 1975. In the

1980s petitioner organized various business entities engaged in residential real

estate projects. Petitioner then worked as a salaried employee for the better part of

the next decade.




      1
        (...continued)
issue, and all Rule references are to the Tax Court Rules of Practice and
Procedure, unless otherwise indicated.
                                         -3-

[*3] B. Seaboard Controls

      Petitioner served as bookkeeper for Seaboard Controls (Seaboard) from

1992 to March 1994 and prepared its Federal income tax returns.

      Seaboard was involved in a project for the Venezuelan Government

(Venezuelan project). To that end, Seaboard tasked petitioner with obtaining

financing on Seaboard’s behalf. Petitioner was unsuccessful, and Seaboard

ultimately lost money on the Venezuelan project.

      Seaboard never had a profit-sharing agreement with petitioner relating to

the Venezuelan project. Petitioner never requested Seaboard to satisfy any

purported debt.

      C. Bank Fraud Incarceration

      Petitioner was incarcerated from April 1994 to December 1995 for a Federal

bank fraud conviction. Petitioner was not employed, nor did he earn income

during his incarceration.

      D. Houston Drywall

      Houston Drywall, Inc. (Houston Drywall), d.b.a. Classic Contractors of

Houston, Inc. (Classic Contractors), hired petitioner as a salesman after his

incarceration. Houston Drywall paid petitioner wages during each year at issue.
                                          -4-

[*4] Petitioner also prepared Federal tax returns for Classic Contractors for 1998

through 2001.

      Classic Contractors paid petitioner an additional $28,8172 in 1996, $37,173

in 1997 and $9,400 in 1998. Classic Contractors filed Forms 1099-MISC,

Miscellaneous Income, for those years (1099 income).

      E. Kingwood Project

      Petitioner proposed a residential real estate project in Kingwood, Texas

(Kingwood project). Classic Contractors agreed to purchase a tract of land for the

Kingwood project if petitioner developed, marketed and sold the residential lots.

Classic Contractors agreed to split with petitioner the net profit.

      Classic Contractors obtained financing to purchase an undeveloped tract of

land. Petitioner then developed and subdivided the real property into

approximately 250 residential lots. Petitioner sold about 50 lots but was unable to

sell the remainder. Classic Contractors eventually defaulted on the note, and the

lender took title of the remaining lots. The Kingwood project thus was

unprofitable.

      Petitioner was not owed any money related to the Kingwood project. Nor

did petitioner ever attempt to collect any purported debt from Classic Contractors.

      2
          Monetary amounts are rounded to the nearest dollar.
                                         -5-

[*5] II. Federal Income Tax Returns for the Years at Issue

      Petitioner prepared and filed Forms 1040, U.S. Individual Income Tax

Return, for the years at issue. Petitioner used the accrual basis of accounting for

the years at issue despite being an individual.

      Petitioner reported wage income from Classic Contractors of $55,000 for

1996, $164,719 for 1997, $260,000 for 1998, $260,730 for 1999, $260,000 for

2000 and $255,230 for 2001. Petitioner claimed he was exempt from withholding

on Form W-4, Employee’s Withholding Allowance Certificate, he submitted to his

employer at the beginning of each year at issue.

      Petitioner also reported a consulting business on Schedule C, Profit or Loss

From Business, for the years at issue. Petitioner reported $5,491 of Schedule C

income for 1997 but no Schedule C income for the other years at issue. Nor did

petitioner report the 1099 income. Petitioner claimed bad debt deductions of

$41,302 for 1996, $137,500 for 1997, $215,100 for 1998, $209,000 for 1999,

$183,727 for 2000 and $205,000 for 2001. Petitioner determined the uncollectible

amounts resulting from the Venezuelan and Kingwood projects at the end of each

year at issue.

      Respondent requested information regarding the 1099 income. Petitioner

claimed that he had reported the 1099 income as income for 1995 and 1996. He
                                         -6-

[*6] asserted that the 1099 income Classic Contractors reported in 1997 was a

payment on accounts receivable. Petitioner asserted that Classic Contractors made

or would make additional payments. Respondent later requested additional

information regarding the 1099 income. Petitioner again claimed that he had

reported that income for 1995 and 1996 and the payment was posted against an

outstanding balance on an account receivable.

      Petitioner also provided respondent fabricated documents that purportedly

corroborated the debts. One such document was a letter purportedly issued by

Classic Contractors during petitioner’s incarceration and before his employment

with Classic Contractors.

      Respondent’s criminal investigation unit (CIU) reviewed the returns

petitioner filed. Petitioner provided documents during a voluntary interview.

Each document showed purported net operating losses (NOLs) petitioner carried

forward and the purported bad debt that petitioner wrote off each year. CIU

recommended that the United States criminally prosecute petitioner.

III. Petitioner’s Conviction for Filing a False Tax Return

      The United States indicted petitioner for filing fraudulent returns and

providing materially false documentation for 1998, 1999 and 2000. Petitioner

agreed to plead guilty to filing a false Federal income return for 2000.
                                          -7-

[*7] Petitioner entered into a plea agreement acknowledging that he had never

reported income from Classic Contractors and that he was not entitled to any bad

debt deduction. The parties agreed that petitioner had an “unused, available, and

partially offsetting [$102,108] net operating loss deduction” for 2000 (2000 NOL)

resulting in a $19,603 tax liability. Petitioner agreed, however, that the stated tax

liability was only for criminal prosecution purposes and did not resolve his civil

tax liabilities. The plea agreement “expressly exclude[d] and reserve[d] for

subsequent civil proceedings the determination of any tax, interest or penalties

due.”

IV. Deficiency Notice

        Respondent issued petitioner the deficiency notice disallowing the bad debt

deductions and determining that petitioner failed to report self-employment

income for 1996, 19973 and 1998. Respondent also determining that the civil

fraud penalties applied against petitioner for the years at issue.

        Respondent attached to the deficiency notice a statement of income tax

changes and a six-page explanation of examination changes with five exhibits


        3
      Respondent determined that petitioner did not report self-employment
income of $31,682 for 1997. This amount represents the $37,173 Classic
Contractors reported on the Form 1099-MISC as paid to petitioner less $5,491 in
Schedule C income petitioner reported for 1997.
                                          -8-

[*8] (explanation). Respondent detailed in the explanation the reason for each

adjustment.

      Petitioner filed the petition contesting all determinations in the deficiency

notice.

                                      OPINION

      We are presented with an individual taxpayer that used the accrual method

of accounting to offset wage income with purported bad debts. We must decide

whether respondent correctly disallowed the bad debt deductions and determined

petitioner did not report income. We also address a series of procedural

challenges petitioner raises. We then consider whether respondent demonstrated

by clear and convincing evidence that petitioner acted with intent to evade tax

such that he is liable for the fraud penalty.

I. Burden of Proof Generally

      We begin with the burden of proof. The Commissioner’s determinations in

a deficiency notice are presumed correct, and the taxpayer bears the burden of

proving otherwise. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).

Deductions are generally a matter of legislative grace, and the taxpayer bears the

burden of proving he or she is entitled to claimed deductions. INDOPCO, Inc. v.

Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292
                                          -9-

[*9] U.S. 435, 440 (1934). Petitioner likewise carries the burden of substantiation.

Hradesky v. Commissioner, 65 T.C. 87, 90 (1975), aff’d per curiam, 540 F.2d 821

(5th Cir. 1976). A taxpayer must substantiate amounts claimed as deductions by

maintaining the records necessary to establish that he or she is entitled to the

deductions. Sec. 6001; Hradesky v. Commissioner, 65 T.C. at 90. The Court need

not accept a taxpayer’s self-serving testimony when the taxpayer fails to present

corroborative evidence. Beam v. Commissioner, T.C. Memo. 1990-304 (citing

Tokarski v. Commissioner, 87 T.C. 74, 77 (1986)), aff’d without published

opinion, 956 F.2d 1166 (9th Cir. 1992).

      The burden may shift to the Commissioner if the taxpayer proves that he or

she has satisfied certain conditions. Sec. 7491(a); Snyder v. Commissioner, T.C.

Memo. 2001-255. Petitioner has not complied with the substantiation

requirements of section 7491(a). See Higbee v. Commissioner, 116 T.C. 438

(2001). Nor has petitioner cooperated in this matter such that the burden of

production would shift to respondent to produce information. See sec. 6201(d).

The burden therefore does not shift to respondent under section 7491(a).

II. Bad Debt Deductions

      We turn now to the bad debt deductions petitioner claimed. Respondent

contends that petitioner failed to show a bona fide debt existed that became
                                        -10-

[*10] worthless during each year for which petitioner claimed the deduction.

Petitioner contends the 2000 NOL establishes that he had available net operating

losses from earlier years.

      A. Bad Debt

      We first consider whether the bad debt deductions petitioner claimed

satisfy section 166. Petitioner contends that he correctly deducted debts Classic

Contractors and Seaboard purportedly owed to him. Respondent asserts that

petitioner has not demonstrated that he met the requirements for any deduction

under section 166. We agree.

      A taxpayer may deduct any bona fide business debt that becomes worthless

within a taxable year. Sec. 166(a)(1). An accrual method taxpayer may deduct

receivables as bad debts to the extent that the taxpayer included those amounts in

income for that year or a prior year. Sec. 1.166-1(c), Income Tax Regs. Likewise,

a worthless debt arising from unpaid wages, fees or similar item of taxable income

is not deductible as a bad debt unless the taxpayer has included the amount in

income for the year for which the bad debt is deducted or for a prior tax year.

Schnell v. Commissioner, T.C. Memo. 2006-147.

      Petitioner’s contention that he included income, as an individual, for prior

years under the accrual method is absurd. Petitioner never included in income the
                                        -11-

[*11] purported profits from the Venezuelan project or the Kingwood project. See

id. Nor did petitioner show a debt existed.4 A bona fide debt arises from a

debtor-creditor relationship based upon a valid and enforceable obligation to pay a

fixed or determinable sum of money. Kean v. Commissioner, 91 T.C. 575, 594

(1988); sec. 1.166-1(c), Income Tax Regs. There is no support that Seaboard or

Classic Contractors was indebted to petitioner or a debtor-creditor relationship

existed. Seaboard and Classic Contractors, not petitioner, each realized a loss

from the unsuccessful ventures.

      Petitioner also failed to demonstrate the purported debts became worthless

during the years at issue. A taxpayer must prove that the debt had value at the

beginning of the year in which it allegedly became worthless and that it became

worthless during that year. Estate of Mann v. United States, 731 F.2d 267, 275

(5th Cir. 1984); Am. Offshore, Inc. v. Commissioner, 97 T.C. 579, 593-594

(1991). Petitioner testified that he determined the amount of debt that became


      4
       Petitioner provided carbon copies of checks that he claims demonstrate the
existence of bad debts but failed to submit any corresponding receipts or bank
statements. The checks do not substantiate the existence of bad debts. See Miller
v. Commissioner, T.C. Memo. 1996-402 (carbon copies of checks without
corroborating bank statements did not meet substantiation requirements); Burrell
v. Commissioner, T.C. Memo. 1994-574 (carbon copies of uncanceled checks and
self-made receipts did not meet substantiation requirements).
                                        -12-

[*12] worthless each year. Petitioner provided no credible documentation,

however, corroborating his assertion. Nor did petitioner ever attempt to collect

any of the purported debt. We therefore find that petitioner failed to establish

there was any debt for section 166 purposes.

      B. Collateral Estoppel

      We now consider whether the 2000 NOL described in the plea agreement

precludes respondent from challenging certain bad debt deductions. Petitioner

asserts that the 2000 NOL establishes the purported debt and precludes respondent

from challenging the bad debt deductions for 1996 through 1999. Respondent

counters that he is not precluded because the 2000 NOL5 was not an essential fact

actually litigated in the prior proceeding. We agree with respondent.

      Collateral estoppel may preclude a party from litigating previously decided

issues of fact or law necessary to a court’s prior judgment. Commissioner v.

Sunnen, 333 U.S. 591, 598 (1948); Meier v. Commissioner, 91 T.C. 273, 286

(1988). Collateral estoppel applies only when the parties actually litigated the

      5
        We note that petitioner never demonstrated an available NOL. Rather,
petitioner asserted at trial that the plea agreement established the 2000 NOL and
precluded respondent from denying petitioner an NOL available for earlier years.
The burden nonetheless rested with petitioner to demonstrate that he was entitled
to NOL deductions. Petitioner acknowledged at trial that he was not attempting to
reconstruct the NOL. Nor does the record establish petitioner was entitled to
claim any NOL deductions.
                                         -13-

[*13] issue and resolving that issue was essential to the prior decision.6 Peck v.

Commissioner, 90 T.C. 162, 166-167 (1988), aff’d, 904 F.2d 525 (9th Cir. 1990).

A fact stated in a plea agreement is not established unless that fact was a necessary

element for conviction. Uscinski v. Commissioner, T.C. Memo. 2006-200.

      The plea agreement does not preclude respondent from challenging the bad

debt deductions. Petitioner pleaded guilty to filing a false individual tax return for

2000. This establishes an underpayment for that year. See sec. 7206(1); Laciny v.

Commissioner, T.C. Memo. 2013-107. The 2000 NOL was not a necessary

element, however, of that crime. The material fact that constituted the false

statement was the bad debt deduction petitioner claimed. The 2000 NOL was

relevant to the tax loss for criminal sentencing purposes. And petitioner agreed

that the plea agreement did not resolve his civil tax liability. Collateral estoppel

does not preclude respondent’s determination.

III. 1099 Income

      We next consider whether respondent correctly determined that petitioner

failed to report the 1099 income. Petitioner asserts that the Forms 1099-MISC

alone are insufficient for respondent to determine petitioner had unreported

      6
       Certain conditions must also be met for collateral estoppel to apply. See
generally Peck v. Commissioner, 90 T.C. 162, 166-167 (1988), aff’d, 904 F.2d 525
(9th Cir. 1990). We need not address the other elements.
                                        -14-

[*14] income. See Portillo v. Commissioner, 932 F.2d 1128, 1134 (5th Cir. 1991),

aff’g in part, rev’g in part T.C. Memo. 1990-68. Respondent counters that the

determination is factually supported because petitioner acknowledged that he

received the 1099 income. See Petzoldt v. Commissioner, 92 T.C. 661, 687-688

(1989); Fankhanel v. Commissioner, T.C. Memo. 1998-403, aff’d without

published opinion, 205 F.3d 1333 (4th Cir. 2000). We agree with respondent.

      Petitioner disputes the income’s characterization, not his receipt of it. The

record demonstrates that petitioner acknowledged during examination receiving

the 1099 income. He claimed that he reported the 1099 income for an earlier year

as repayment of indebtedness from Classic Contractors. We have already rejected

petitioner’s assertion that Classic Contractors was indebted to him and that he

previously reported the income. Petitioner’s admission that he received the

income supports respondent’s determination with respect to the 1099 income.

Petitioner has not demonstrated the determination is incorrect. See Petzoldt v.

Commissioner, 92 T.C. at 689; see also Hardy v. Commissioner, 181 F.3d 1002,

1004 (9th Cir. 1999), aff’g T.C. Memo. 1997-97. We therefore sustain

respondent’s determination that petitioner had unreported income.
                                        -15-

[*15] IV. Procedural Challenges to Respondent’s Determinations

      Petitioner throws a variety of procedural challenges at the deficiency

determination. We address each argument in turn.

      A. Adequacy of Deficiency Notice

      Petitioner first suggests, without any particularity, that the deficiency notice

fails to describe the basis for the adjustments. See sec. 7522. We disagree. The

deficiency notice identifies the amounts, the tax years and the reasons for the

adjustments. See Health Inv. Corp. v. Commissioner, T.C. Memo. 2010-211. And

respondent explained the reason for each adjustment7 in the explanation. We hold

that the deficiency notice comports with the requirements of section 7522.

      B. Multiple Examinations

      We next consider petitioner’s assertion that respondent improperly

examined returns for certain years multiple times. Petitioner contends respondent

was obligated to issue second examination notices before doing so. See sec.

7605(b). Respondent denies conducting multiple examinations. We agree with

respondent.


      7
       Petitioner also argues that respondent did not adequately explain why he
allowed petitioner a short-term capital loss of $3,000 for each year at issue.
Petitioner claims that respondent was required to “describe the source” of the
losses. Petitioner, however, does not challenge this adjustment.
                                        -16-

[*16] The Commissioner may review matching information on a tax return with

other records or information in his possession. Id.; see Ellis v. Commissioner,

T.C. Memo. 2007-207, aff’d in part, rev’d in part, 346 Fed. Appx. 346 (10th Cir.

2009); Rev. Proc. 2005-32, sec. 4.03(1)(b), 2005-1 C.B. 1206, 1207. A taxpayer’s

voluntary provision of information to the Commissioner regarding a return is not

considered an examination. See Rev. Proc. 2005-32, sec. 4.03(1)(c). The record

demonstrates that petitioner provided information during a voluntary interview

with CIU. See Ballantine v. Commissioner, 74 T.C. 516, 524 (1980); Rose v.

Commissioner, 70 T.C. 558, 560 (1978). We therefore find that respondent was

not obligated to issue a notice of second examination.

V. Fraudulent Intent

      We now consider whether respondent demonstrated by clear and convincing

evidence that petitioner acted with fraudulent intent. We do so to decide whether

petitioner is liable for the civil fraud penalty under section 6663 and whether the

limitations period under section 6501(c) bars respondent’s determinations. We

address each in turn.

      A. Fraud Penalty

      We now consider whether petitioner is liable for the fraud penalty under

section 6663. The Commissioner must prove by clear and convincing evidence
                                        -17-

[*17] that the taxpayer underpaid his or her income tax and that some part of the

underpayment was due to fraud. Secs. 7454(a), 6663(a); Rule 142(b); Clayton v.

Commissioner, 102 T.C. 632, 646 (1994). Fraud is a factual question to be

decided on the entire record and cannot be presumed. Rowlee v. Commissioner,

80 T.C. 1111, 1123 (1983); Beaver v. Commissioner, 55 T.C. 85, 92 (1970). For

each tax year, respondent must establish fraud through independent evidence. See

Daoud v. Commissioner, T.C. Memo. 2010-282, aff’d, ___ Fed. Appx. ____, 2013

WL 6405826 (9th Cir. Dec. 9, 2013).

             1. Badges of Fraud

      The Commissioner must show that the taxpayer acted with specific intent to

evade tax that the taxpayer knew or believed he or she owed by conduct intended

to conceal, mislead or otherwise prevent the collection of tax. Sec. 7454; Recklitis

v. Commissioner, 91 T.C. 874, 909 (1988); Stephenson v. Commissioner, 79 T.C.

995, 1005 (1982), aff’d, 748 F.2d 331 (6th Cir. 1984). Direct evidence of fraud is

seldom available, and its existence may therefore be determined from the

taxpayer’s conduct and the surrounding circumstances. Stone v. Commissioner,

56 T.C. 213, 223-224 (1971).

      Courts rely on several indicia or badges of fraud. These badges of fraud

include understatement of income, inadequate records, failure to file tax returns,
                                         -18-

[*18] concealment of assets, failure to cooperate with tax authorities, filing false

documents, failure to make estimated tax payments, engaging in illegal activity,

attempting to conceal illegal activity, dealing in cash, implausible or inconsistent

explanations of behavior, an intent to mislead that may be inferred from a pattern

of conduct, and lack of credibility of the taxpayer’s testimony. Spies v. United

States, 317 U.S. 492, 499 (1943); Bradford v. Commissioner, 796 F.2d 303,

307-308 (9th Cir. 1986), aff’g T.C. Memo. 1984-601. Although no single factor is

necessarily sufficient to establish fraud, a combination of several of these factors

may be persuasive evidence of fraud. Solomon v. Commissioner, 732 F.2d 1459,

1461 (6th Cir. 1984), aff’g per curiam T.C. Memo. 1982-603.

                    a. Understatement of Income

      Petitioner consistently understated his income for each year at issue. The

understatement of income can be shown by an overstatement of deductions. See

Daoud v. Commissioner, T.C. Memo. 2010-282. Petitioner claimed bad debt

deductions that he was unable to substantiate. The deduction amounts

corresponded with his reported income to offset most or all of his liability for each

year. Petitioner also failed to report 1099 income.
                                          -19-

[*19]                b. Inadequate and Incomplete Records

        Petitioner’s inadequate and incomplete records failed to substantiate any

bad debt deductions for the years at issue. There was no credible documentation

confirming that petitioner held debt, that the debt ever became worthless or that

the debt became worthless the year he claimed.

                     c. Failure To Cooperate

        Petitioner also did not cooperate with respondent. Respondent repeatedly

sought additional information regarding the years at issue. Petitioner made false

statements and produced misleading or fabricated documents purportedly

substantiating the claimed deductions.

                     d. Engaging in and Concealing Illegal Conduct

        Petitioner engaged in illegal conduct as he pleaded guilty to filing a false

Federal income tax return for 2000. A conviction under section 7206(1) is highly

persuasive evidence that a taxpayer intended to evade tax for that year. See Morse

v. Commissioner, 419 F.3d 829, 833 (8th Cir. 2005), aff’g T.C. Memo. 2003-332;

Stefansson v. Commissioner, T.C. Memo. 1994-162; Avery v. Commissioner, T.C.

Memo. 1993-344; Miller v. Commissioner, T.C. Memo. 1989-461. Petitioner

acknowledged in the plea agreement that there was no bona fide debt and that he

was not entitled to the bad debt deduction. This purported debt was the same that
                                          -20-

[*20] he determined became worthless and claimed as deductions for the other

years at issue. Further, petitioner attempted to conceal his illegal activity from

respondent by providing fabricated documents and misleading information.

                   e. Inconsistent Explanations and Incredible Testimony

      Petitioner provided inconsistent explanations that demonstrate an intent to

mislead respondent. Respondent examined bad debt deductions petitioner claimed

for multiple years. Petitioner repeatedly asserted that he was entitled to the

deductions. He claimed that he reported the 1099 income in an earlier year when

he had in fact not reported the income.

      Petitioner’s testimony lacked credibility. He continued to assert that

Seaboard and Classic Contractors were indebted to him. The record consistently

contradicted his testimony.

                   f. Tax Expertise

      Petitioner’s experience and understanding of tax law support a finding that

he acted with fraudulent intent. See Scallen v. Commissioner, 877 F.2d 1364,

1370-1371 (8th Cir. 1989), aff’g T.C. Memo. 1987-412. A taxpayer’s

intelligence, education and sophistication are relevant in determining fraudulent

intent. Scott v. Commissioner, T.C. Memo. 2012-65; Wright v. Commissioner;

T.C. Memo. 2000-336. Petitioner was a sophisticated and savvy businessman. He
                                          -21-

[*21] had worked as a bookkeeper and accountant. Petitioner independently

researched tax issues. We find that petitioner understood his conduct was contrary

to existing tax law.

                       g. Badges of Fraud Conclusion

         In toto, many badges of fraud apply to petitioner. We conclude that

respondent has proven by clear and convincing evidence that there was an

underpayment for each year at issue and each underpayment was attributable to

fraud.

               2. Petitioner’s Burden

         Once the Commissioner has established by clear and convincing evidence

that any portion of an underpayment is attributable to fraud, the entire

underpayment shall be treated as attributable to fraud, except with respect to any

portion of the underpayment that the taxpayer establishes (by a preponderance of

the evidence) is not attributable to fraud. Sec. 6663(b); see Foxworthy, Inc. v.

Commissioner, T.C. Memo. 2009-203, aff’d, 494 Fed. Appx. 964 (11th Cir. 2012).

         Petitioner asserts that he misunderstood the requirements to claim the bad

debt deductions because his tax professional advised him to use the accrual

method of accounting. Respondent contends that petitioner failed to show that any

portion was not attributable to fraud. We agree with respondent.
                                        -22-

[*22] Petitioner contends he relied on a tax professional’s advice. Petitioner

failed to corroborate, however, that he received the advice he claims he did. The

tax professional did not testify. And petitioner did not offer any evidence

corroborating his assertions.

      Further, petitioner has not explained how advice purportedly given in the

1970s informed him on whether he could claim bad debt deductions arising in the

1990s. There is no indication that a tax professional reviewed relevant documents

and advised petitioner on the years at issue. Rather, petitioner had a strong

understanding of tax law and prepared returns for himself and his former

employers. His assertions are incredible, illogical and entirely unbelievable. The

record demonstrates that petitioner consistently misled respondent and

intentionally confused issues to avoid his tax obligations. Petitioner failed to

demonstrate that any portion of the income was not attributable to fraud.

      Accordingly, we find that petitioner is liable for the fraud penalty under

section 6663 for each year at issue.8




      8
        Respondent alternatively requested we impose an accuracy-related penalty
under sec. 6662. In light of our fraud finding, we need not consider the accuracy-
related penalty.
                                        -23-

[*23] B. Statute of Limitations

      Petitioner also argues that the limitations periods expired before respondent

assessed petitioner’s tax for the years at issue. Respondent contends that the

limitations period does not apply for the years at issue because petitioner acted

with the intent to evade tax. We agree with respondent.

      The Commissioner must generally make such an assessment within a

three-year period after a taxpayer files his or her return. Sec. 6501(a). In the case

of a false and fraudulent return with the intent to evade tax, however, the tax may

be assessed at any time. Sec. 6501(c)(1).

      We have found that petitioner is liable for the fraud penalty under section

6663 for all years at issue. Respondent’s burden of proof under section 6501(c)(1)

is the same as that imposed under section 6663. See Browning v. Commissioner,

T.C. Memo. 2011-261. We therefore hold that the limitations periods for

assessing petitioner’s tax are extended indefinitely. See sec. 6501(c)(1); Paterson

v. Commissioner, T.C. Memo. 2007-109. Accordingly, respondent is not barred

from assessing petitioner’s deficiency for any year at issue. See sec. 6501(c)(1).
                                          -24-

[*24] VI. Conclusion

         We sustain respondent’s deficiency determinations for the years at issue,

including the fraud penalty under section 6663.

         In reaching these holdings, we have considered all arguments, and, to the

extent not addressed here, we conclude that they are moot, irrelevant or without

merit.

         To reflect the foregoing,



                                                       Decision will be entered for

                                                 respondent.
