                          T.C. Memo. 2003-235



                      UNITED STATES TAX COURT



                STEPHEN C. CARTER, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 372-98.                    Filed August 7, 2003.


     Stephen C. Carter, pro se.

     Francis C. Mucciolo, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     FOLEY, Judge:   The issue for decision is whether petitioner

is liable for deficiencies, additions to tax for fraud, and a

fraud penalty.




                           FINDINGS OF FACT
                               - 2 -

     Petitioner filed his 1986 and 1987 income tax returns on

March 10, 1989, 1988 return on October 20, 1989, and 1989 return

sometime after August 15, 1990.   On September 30, 1997,

respondent determined deficiencies relating to 1986 through 1989;

additions to tax for fraud, pursuant to section 6653(b)1,

relating to 1986, 1987, and 1988; and a fraud penalty, pursuant

to section 6663, relating to 1989.

     From 1984 through 1990, petitioner worked for Stuart-James

Company, Inc. (Stuart-James) in Tampa, Florida.   Petitioner

started as an assistant manager, was then promoted to manager,

and from 1985 through 1990 was regional vice president

responsible for 14 branch offices and approximately 300 sales

representatives.   Because of his significant management

responsibilities and demanding travel schedule, petitioner relied

heavily on staff to manage his affairs.   In the late 1980s, he

hired Francis Pisano, a certified public accountant and tax

attorney, and Kristine Grace DeFillippis, a secretary.

Petitioner agreed to pay 3 percent of his income to Mr. Pisano.

In exchange, Mr. Pisano was responsible for managing petitioner’s

business and personal financial matters and preparing

petitioner’s 1986 through 1989 returns.   Ms. DeFillippis managed

petitioner’s administrative (e.g., reimbursement of petitioner’s

     1
        Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue.
                                - 3 -

travel expenses) and personal matters (e.g., she corresponded

with Mr. Pisano regarding the filing of petitioner’s 1986 through

1989 returns and gave Mr. Pisano copies of petitioner’s

reimbursement expense checks relating to 1988 and 1989).

     In the mid-1980s, petitioner established and funded an

account in the name of his friend, Gina M. Oliva (Oliva account).

Petitioner used this account to purchase and sell Stuart-James’

initial public offerings.    These trades were against company

policy and in 1986 and 1987 produced capital gain income of

$15,315 and $136, respectively.    Petitioner did not disclose the

Oliva account to Mr. Pisano or report the capital gain income on

his 1986 and 1987 returns.

     Petitioner, on the Schedule C, Profit or Loss From Business,

accompanying his 1986, 1987, 1988, and 1989 returns, deducted

total travel and entertainment expenses of $33,963, $79,726,

$95,798, and $64,494, respectively.     These returns did not

reflect $153,711 of travel and expense reimbursements received

from Stuart-James from 1986 through 1989.     In 1989, petitioner

received, but did not report on his 1989 return, a pension

distribution of $105,341.



     In 1995, petitioner was indicted for tax evasion, pursuant

to section 7201, relating to 1986 through 1989, and was convicted

of tax evasion relating to 1989.    The conviction was subsequently
                                 - 4 -

affirmed on appeal and became final.

     Petitioner, while residing in Tampa, Florida, timely filed a

petition on January 2, 1998.

                                OPINION

     On September 30, 1997, respondent determined petitioner’s

tax liability relating to 1986, 1987, 1988, and 1989.        Petitioner

concedes that he underpaid his 1986 through 1989 taxes, but

contends that the liabilities were determined after the 3-year

period of limitations set forth in section 6501(a).         Respondent

contends that the determinations are timely because petitioner’s

underpayments of tax are due to fraud and thus are not subject to

the 3-year limitation period.    Sec. 6501(c)(1).

     Respondent did not establish by clear and convincing

evidence that petitioner was liable for fraud.2      Sec. 7454(a);

Parks v. Commissioner, 94 T.C. 654, 660-661 (1990).         To the

contrary, petitioner established that he did not intend to evade

tax, but was negligent and inattentive regarding his record

keeping and tax filing obligations.       See Gajewski v.

Commissioner, 67 T.C. 181, 199 (1976) (stating that the existence

of fraud is a question of fact to be determined upon


     2
        Secs. 6501(c)(1), 6653(b), and 6663 all require the same
elements for respondent to establish fraud. See Rhone-Poulenc
Surfactants & Specialties, L.P. v. Commissioner, 114 T.C. 533,
548 (2000); Mobley v. Commissioner, T.C. Memo. 1993-60, affd.
without published opinion 33 F.3d 1382 (11th Cir. 1994).
                                 - 5 -

consideration of the entire record), affd. without published

opinion 578 F.2d 1383 (8th Cir. 1978).    Petitioner relied on Mr.

Pisano to accurately prepare his returns and believed that the

travel and entertainment expense reimbursements had been taken

into account.   See Marinzulich v. Commissioner, 31 T.C. 487, 490

(1958) (holding that a petitioner’s reliance upon his accountant

to prepare an accurate return may indicate an absence of

fraudulent intent).   With respect to petitioner’s use of the

Oliva account, he intended to circumvent company, rather than

tax, rules.   Accordingly, respondent’s determinations relating to

1986, 1987, and 1988 are barred.    Respondent’s determination

relating to 1989, however, is sustained because petitioner’s

conviction, pursuant to section 7201, estops him from challenging

respondent’s fraud determination relating to that year.    Blohm v.

Commissioner, 994 F.2d 1542, 1544 (11th Cir. 1993), affg. T.C.

Memo. 1991-636.

     Contentions we have not addressed are irrelevant, moot, or

meritless.




     To reflect the foregoing,



                                          Decision will be entered
- 6 -

        for petitioner as to the 1986,

        1987, and 1988 taxable years

        and for respondent as to the

        1989 taxable year.
