Cir

MEMORANDUM

Gary Garcia and California Radomes, Inc. (CRI) appeal from the Tax Court’s imposition of penalties under Internal Review Code (IRC) § 6663(a) for fraudulent intent to make substantial underpayments of income tax in the years 2005, 2006, and 2007. We have jurisdiction pursuant to 26 U.S.C. § 7482 (a)(1), and we affirm.

Garcia and CRI argue that the Tax Court clearly erred in determining that petitioners made underpayments with fraudulent intent, because their failure to disclose corporate holding account information and transfers made to Garcia from CRI were honest mistakes.

Under IRC § 6668(a), a taxpayer is liable for a penalty equal to 75 percent of a tax underpayment when the underpayment is made with fraudulent intent. Fraudulent intent can be determined by circumstantial evidence of fraud based on certain indicia or “badges” of fraudulent intent. Bradford v. Comm’r, 796 F.2d 303, 307 (9th Cir.1986). Such badges may include implausible or inconsistent explanations of behavior, inadequate records, concealing assets, and failure to cooperate with tax authorities. Edelson v. Comm’r, 829 F.2d 828, 832 (9th Cir.1987). The Tax Court identified several badges of fraud…