The Tax Court, adding and subtracting “badges” of fraud, has found a California business owner and his companies not liable for a 75 percent civil fraud penalty.
In Carreon v. Commissioner, T.C. Memo 2014-6, the court found in a January ruling that even though some badges of fraud existed, there were more factors in the taxpayer’s favor, and consequently, the IRS failed to prove by clear and convincing evidence that some part of an underpayment was attributable to fraud.
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