U.S. Tax Court Upholds Civil Fraud Penalties for Concealed Business Income

The U.S. Tax Court held that taxpayers were liable for civil fraud penalties under I.R.C. §6663 after finding that one spouse intentionally concealed business income from a jointly owned medical practice by diverting receipts into personal bank accounts and providing incomplete and misleading information to the taxpayers’ accounting firm. Taxpayers, a married couple who were licensed medical doctors, jointly owned a medical practice that operated two family clinics and used various systems to track patient payments and billing. During the years at issue, one spouse deposited business receipts into personal bank accounts on over 300 occasions while ensuring that only ...