Court Opinion

ID: 4484094
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:16:30.6315+00
Date Added: 2024-06-11T14:54:04.017340
License: Public Domain

Scott, Judge: Respondent determined deficiencies in Federal income tax and additions to tax under section 6653(b)1 (fraud) for the calendar years and in the amounts listed below: Additions to tax Year Deficiency sec. 6653(b) 1968 . $1,926.30 $963.15 1969 . 2,379.31 1,189.65 1970 . 2,666.57 1,333.29 In his answer, respondent asserts that the addition to tax for 1969 should be increased by $481.18, for a total addition to tax of $1,670.83 for 1969. The following three issues are presented for our consideration: (1) Whether petitioner is estopped by his conviction of violating section 7206(1) by filing false returns which he knew substantially understated his total reportable income for each of the years 1968, 1969, and 1970 from denying in this case that his returns were false in that the income reported thereon was substantially understated; (2) whether there is an underpayment of tax any part of which is due to fraud for each of the years 1968, 1969, and 1970; and (3) whether petitioner failed to report income for the years in the amounts determined by respondent or in any other amounts.2  FINDINGS OF FACT Some of the facts have been stipulated; the stipulations and the stipulated exhibits are incorporated herein by this reference. When the petition in this case was filed, petitioner was a legal resident of Trenton, N.J. During the years in issue, petitioner was a committeeman and during part of this time mayor of Hamilton Township in Mercer County, N.J., and was in charge of the road department of that township. He was also the Chief of the Bureau of Recreation of the State of New Jersey. He had no other gainful employment although he held unpaid positions as an officer of the American Legion and State Director of American Legion Baseball. On February 13, 1974, a United States grand jury for the District of New Jersey, sitting at Newark, returned an indictment against petitioner charging him with five counts of extortion involving vendors and contractors selling to Hamilton Township during 1969 and 1970, and also charging him with three counts of violating section 7206(1) for 1968, 1969, and 1970 — counts VI, VII, and VIII. Count VI of the indictment is as follows: COUNT VI That on or about the 9th day of February, 1969, in the District of New Jersey, the defendant herein: David C. Goodwin a resident of Trenton, New Jersey, did wilfully and knowingly make and subscribe and cause to be made and subscribed, a United States Joint Income Tax Return (Form 1040) for the calendar year 1968, which was verified by a written declaration that it was made under the penalties of perjury, and which was filed with the Internal Revenue Service, which said income tax return he did not believe to be true and correct as to every material matter, in that it was stated on Line 7, Page 1, of said income tax return that total income was the sum of $18,747.68, whereas, as he then and there well knew and believed, the correct total income for the period reported was an amount substantially in excess of the reported total sum of $18,747.68. In violation of Section 7206(1), Internal Revenue Code, Title 26, United States Code, Section 7206(1). Counts VII (relating to 1969) and VIII (relating to 1970) of the indictment are identical to count VI except as to the years involved and the dollar amount of reported income. On November 6,1974, petitioner entered a plea of guilty to counts VI, VII, and VIII of the indictment which are alleged violations of section 7206(1). On March 19, 1975, a judgment with respect to the indictment returned on February 13, 1974, was entered against petitioner by the United States District Court, District of New Jersey. This judgment stated in part as follows: Month Day Year In the presence of the attorney for the government the defendant appeared in person on this date . 3 18 75 * * * * * ‘ * * WITH COUNSEL * * * [[Image here]] GUILTY, and the court being satisfied that * * * there is a factual basis for the plea, on Counts 6, 7, and 8. PLEA ****** Defendant has been convicted as charged of the offense(s) of filing false and fraudulent income tax returns. 26:7206(1) FINDING & JUDGMENT The court asked whether defendent had anything to say why judgment should not be pronounced. Because no sufficient cause to the contrary was shown, or appeared to the court, the court adjudged the defendant guilty as charged and convicted and ordered that: The defendant is hereby committed to the custody of the Attorney General or his authorized representative for imprisonment for a period of two (2) years on Count 6, execution of term sentence suspended and the defendant is placed on probation for a period of two (2) years from this date. It is further adjudged that the defendant do pay a fine of $2,000.00 by the end of the period of probation. It is further ordered and adjudged that imposition of sentence on Count 7 and 8 is hereby suspended. It is further ordered and adjudged that Counts 1, 2, 3, 4, and 5 are hereby dismissed. SENTENCE OR PROBATION ORDER During 1968,1969, and 1970, petitioner made it known to some persons seeking to do business with Hamilton Township that they would have to make contributions “to the party” (i.e., to the Harry E. Lieberman Democratic Club of Hamilton Township, hereinafter sometimes referred to as the Democratic Club) in order to get the township’s business. Sometimes petitioner specified the amount. Sometimes petitioner stated that the amount was to be paid to him in cash. In a number of cases, the amounts so paid to petitioner were then paid by him to A. Harry Glogoff, treasurer of the Democratic Club. Some of the amounts so paid to petitioner were acknowledged by letters from the Democratic Club to the payors. Table I shows some of the sales of equipment, materials, and services made by vendors or contractors to Hamilton Township during the years in issue: Table I Date Vendor or contractor Amount On or about Mar. 19, 1968 ...North Jersey Equipment Co .... $15,460.00 On or about Apr. 23, 1968 ...W. E. Timmerman Co . 15,460.00 Various dates in 1968 .Barrett Paving Co., Inc . 1198,105.69 On or about July 2, 1969 .Colonial Garage, Inc . 37,281.00 Various dates in 1969 .Barrett Paving Co., Inc . 1129,811.27 On or about May 7, 1970 .North Jersey Equipment Co .... 16,175.00 On or about June 10, 1970 ...Lynn Equipment Co . 29,900.00 On or about July 23, 1970 ....Colonial Garage, Inc . 13,350.00 Various dates in 1970 .Barrett Paving Co., Inc . 1124,643.19 Respondent, in the notice of deficiency, determined petitioner received unreported income in the form of kickbacks from companies doing business with Hamilton Township, as indicated in table II: Table II Date Payor Amount 1968 Mar. 19 .North Jersey Equipment Co $750.00 May 5 .W. E. Timmerman Co . 750.00 May 29 .Barrett Paving Co., Inc . 701.25 July 24 . do . 1,371.50 Aug. 22 . do . 587.50 Sept. 25 . do . 736.37 Nov. 27 . do . 1,050.00 Dec. 17 . do ... 500.00 Total . 6,446.62 1969 May 28 .Barrett Paving Co., Inc . $690.00 June 25 .do . 700.00 Aug. 1 .Colonial Garage, Inc . 2,355.00 Aug. 14 .Barrett Paving Co., Inc . 1,500.00 Oct. 8 . do $500.00 Nov. 3 . do 1,000.00 Total . 6,745.00 1970 Apr. 30 .North Jersey Equipment Co . $800.00 May 21 .Barrett Paving Co., Inc . 200.00 June 19 .Lynn Equipment Co., Inc . 1,500.00 July 8 .Barrett Paving Co., Inc . 1,150.00 Aug. 4 .Colonial Garage, Inc . 2,670.00 Aug. 13 .Barrett Paving Co., Inc . 1,000.00 Nov. 25 . do 800.00 Total . 8,120.00 Kespondent’s employees prepared a schedule showing contributions to the Democratic Club that were acknowledged by letters and which appear to have been deposited in a checking account of the Democratic Club, as indicated in table III: Table III Date Party involved Amount Check Cask Aug. 5, 1968 Patrick Cleary . $25 $25 Aug. 8, 1968 Barrett Paving Co., Inc . 450 450 Aug. 29, 1968 Gil Frazier-Scheideler Equipment Co., Inc . 250 250 Oct. 7, 1968 Colonial Garage, Inc . 500 500 Oct. 7, 1968 Albert E. Barrett . 1,000 1,000 Oct. 7, 1968 George Tindall . 100 100 Oct. 7, 1968 Parsons, Brinckerhoff, Quade & Douglass, Engineers . 400 $400 Oct. 7, 1968 Michael Bradley . 200 200 Oct. 7, 1968 Shelly Acuff . 800 800 Oct. 7, 1968 Joseph Leto . 100 100 Nov. 12, 1968 Committeeman David Goodwin . 100 100 July 14, 1969 Gill Frazier, Scheideler Equipment Co., Inc . 200 200 July 21, 1969 1,000 Philip Scuteri . 1,000 Aug. 2, 1969 Colonial Garage, Inc . 1,500 1,500 Aug. 8, 1969 Mayor David Goodwin . (No amount noted) Aug. 3, 1969 Shelly Acuff . 400 400 Dec. 3, 1969 Patterson Chevrolet . (No amount noted) May 26, 1970 Barrett Paving Co., Inc . 300 300 June 3, 1970 Committeeman David Goodwin by N.J. Equipment Co . 500 500 June 5, 1970 Fred F. Morelli . (No amount noted) June 16, 1970 Barrett Paving Co., Inc . 300 300 June 25, 1970 Anonymous . 1,000 1,000 Aug. 10, 1970 Colonial Garage, Inc . (No amount noted) Nov. 23, 1970 Barrett Paving Co., Inc . (No amount noted) Totals . 9,125 1,600 7,525 During the years before the Court, deposits were made to a checking account of the Democratic Club as indicated in table IV: Table IV Year Number of deposits Total cash Total checks Form not indicated 1968 25 $11,501.00 $22,263.21 $427.66 1969 31 11,060.65 22,448.45 0 1970 41 9,100.00 23,613.17 625.00 Totals 97 31,661.65 68,324.83 1,052.66 On August 1, 1969, petitioner deposited $2,240 in cash in his savings account at First National Bank of Bordertown, Border-town, N. J. On June 22, 1970, petitioner repaid $1,000 in cash against a loan he had with the United Savings & Loan Association. Petitioner and his wife, Eva H. Goodwin, filed a joint Federal income tax return for 1968. On this return, petitioner showed his occupation as Chief Bureau Recreation and his employer as the State of New Jersey, Trenton, N.J. His wife’s occupation was shown as housewife. On this return, petitioner reported total income of $18,747.68 consisting of $18,664.42 of wages or salaries and $83.26 of other income, which was composed of $30.46 of interest and $52.80 for sale or exchange of property. Itemized deductions totaling $2,533.41 were claimed. The claimed deductions were composed of medical expense; charitable contributions; real estate, State and local gasoline, and general sales taxes; interest expense composed of interest on a home mortgage, interest paid to a bank, and interest paid to a credit union; and miscellaneous deductions including expenses of attending an American Legion convention, automobile expense based on miles driven as State Director, American Legion Baseball, and professional dues. No other deductions were claimed. Petitioner and his wife filed a joint Federal income tax return for the calendar year 1969 in which petitioner’s occupation was shown as “Chief, Department Recreation State, Mayor, Hamilton Township.” His wife’s occupation was shown as “housewife.” On this return, salaries and wages of $20,360.48 were reported and other income of $650, which consisted of gain on the sale of a capital asset, making total reported income of $21,010.48. From this reported income was deducted as adjustments the amount of $1,820. These adjustments consisted of unreimbursed automobile expense in connection with being on the township committee and mayor of the township of $940 and a sick pay exclusion of $880. On his 1969 return, petitioner claimed itemized deductions of $2,798.19, again consisting of medical expenses, taxes, charitable contributions, and miscellaneous expenses in connection with sponsorship of a team, convention expenses, and also in this year an amount under “League of Municipalities.” Petitioner and his wife filed a joint Federal income tax return for the calendar year 1970. Petitioner’s occupation on this return was shown as “Chief, Recreation Department State,” and his wife's occupation as “housewife.” He reported salaries and wages of $21,780.32 and interest income of $345.18, for a total of $22,125.50, from which was subtracted an adjustment representing transportation expenses of $600 (computed as $1,200 on automobile mileage driven, less $600 reimbursement), leaving adjusted gross income of $21,525.50. On this return, petitioner claimed itemized deductions of $2,511.08, again consisting of medical expenses, taxes, charitable contributions, interest expense, and miscellaneous expenses composed of American Legion delegate expenses and professional dues. For each of the years 1969 and 1970, the income from salaries and wages reported by petitioner on his return totals the amount shown on the Form W-2 petitioner received from the State of New Jersey plus the amount shown on the Form W-2 petitioner received from the Township of Hamilton, N.J.3  Petitioner did not receive unreported income with respect to the following items listed in table II: 1968 May 5 W. E. Timmerman Co $750 Nov. 27 Barrett Paving Co., Inc . 1,050 Dec. 17 Barrett Paving Co., Inc 500 1969 Nov. 3 Barrett Paving Co., Inc 1,000 1970 June 19 Lynn Equipment Co., Inc m o o Nov. 25 Barrett Paving Co., Inc . oo o o OPINION Respondent takes the position that petitioner is estopped by reason of his conviction on a plea of guilty of violation of section 7206(1) for each of the years 1968, 1969, and 1970 from denying that his return for each of these years was false and fraudulent in that he knew and believed that his correct total income for each of these years was an amount substantially in excess of the income reported on his return for the year. Respondent argues, based on the decisions in Arctic Ice Cream Co. v. Commissioner, 43 T.C. 68 (1964), and Plunkett v. Commissioner, 465 F.2d 299 (7th Cir. 1972), affg. a Memorandum Opinion of this Court, that for the purposes of applying the doctrine of collateral estoppel there is no difference between a conviction based upon a plea of guilty and a conviction entered after a trial on the merits. Both of these cases specifically so hold and we follow the holdings of those cases in the instant case. In support of his position that because of his conviction petitioner is estopped to deny that his return for each of the years 1968, 1969, and 1970 is fraudulent and to deny that he omitted substantial amounts of income from his return in each of those years, respondent relies on Considine v. Commissioner, 68 T.C. 52 (1977). In the Considine case, we held that the taxpayer was estopped by his conviction after a jury trial of violating section 7206(1) from denying that his return for the year there involved was fraudulent in that it failed to report a specific item of capital gain income. We pointed out that estoppel applies only with respect to those facts actually litigated in the first case which were essential to the judgment in that case. In the instant case, therefore, we must decide what facts were litigated and essential to the judgment in the criminal case since the conviction was on a guilty plea. In Arctic Ice Cream Co. v. Commissioner, supra, we stated (p. 75): “It is well settled that a plea of guilty means ‘guilty as charged in the indictment,’ and that such a plea is a conclusive judicial admission of all of the essential elements of the offense which the indictment charges.” The essential element of the indictment in the instant case, to which petitioner pleaded guilty, was that in each of the years here in issue, he subscribed under penalties of perjury a joint Federal income tax return which was filed with the Internal Revenue Service, which return he did not believe to be true and correct in that he well knew and believed that his correct total income for the year was substantially in excess of the income he reported. The indictment for violation of section 7206(1)4 in the instant case to which petitioner pleaded guilty, as was the indictment in Considine v. Commissioner, supra, was for willfully subscribing under penalties of perjury a Federal income tax return known or believed to be incorrect in that income was omitted therefrom.5 It was essential to petitioner’s conviction that it be shown that he willfully subscribed to a return which he knew and believed to be false in that income was omitted therefrom. As discussed in the Considine case, the willful subscribing to a false return is the filing of a fraudulent return. In fact, the judgment here convicted petitioner of filing “false and fraudulent income tax returns.” In our view, here, as in Considine, petitioner is estopped to deny that his return for each of the years here in issue was false and fraudulent and that he omitted substantial amounts of income from his return in each of these years. Petitioner argues that the should not be collaterally estopped from denying the charges in the indictment to which he pleaded guilty because— I was advised at the time of these allegations to plead guilty by my attorney to the income tax charges and all other charges would be dropped, which they were. I was told by my attorney at that time that if I pleaded guilty nothing would happen. They would realize that this money did go to the Harry Lieberman Democratic Club, and my pension would be safe. This turned out to be a false statement. I was fined $2,000 in Federal Court, which has since been paid. I was placed on two years probation, which has been served, and my pension has been taken away from me * * * With respect to a similar contention made by a taxpayer in Plunkett v. Commissioner, supra, the court stated as follows (pp. 306-307): We concur in the opinion of the court below that “[t]he stated understanding of counsel, that the government would move to dismiss charges against Mrs. Plunkett if petitioner would plead guilty to the charges against him, does not vitiate petitioner’s otherwise voluntary plea of guilty where the agreement was fully performed in conformity with the petitioner’s expectations. Petitioner did not misunderstand the terms or the immediate consequences of the agreement and his plea of guilty. Hence, the existence of the agreement does not affect the voluntariness of his plea.” 29 CCH Tax Ct.Mem. at 1247. ******* Plunkett also complains that the judge who accepted his guilty plea was not informed of any evidentiary foundation to support the criminal charge. Consequently, the provision of Rule 11 of the Federal Rules of Criminal Procedure that “[t]he court shall not enter a judgment upon a plea of guilty unless it is satisfied that there is a factual basis for the plea” was allegedly violated. [[Image here]] The alleged defect in the proceedings against Plunkett was not of constitutional dimensions. The petitioner took no appeal directly attacking his conviction or sentence, and he has paid the fine imposed upon him. In light of these circumstances and the restrictions placed on McCarthy by HalUday, we can see no justification for sustaining Plunkett’s collateral attack on the conviction and for voiding the consequences of that conviction in the present case. In the instant case, petitioner makes no contention that any representations of any type were made to him by any representative of the Government or by the Court. He refers to advice to him by his own attorney which “turned out to be a false statement.” He has made no showing that he was not fully apprised by the Court of the consequences of his plea of guilty. The judgment in this case recites that the Court is “satisfied that there is a factual basis for the plea” of guilty. No showing has been made that this finding in the judgment is not based on questions propounded to petitioner or adequate facts otherwise ascertained by the District Court judge before entry of the judgment. We, therefore, conclude here, as did the court in Plunkett v. Commissioner, supra, that no justification exists for sustaining a collateral attack on petitioner’s conviction on a plea of guilty. In order for collateral estoppel to apply with respect to the issue raised under section 6653(b), it must be shown as stated in Considine v. Commissioner, supra at 64, that the facts to which the estoppel applies are “ultimate facts with respect to which an identical issue is presented under section 6653(b).” As stated in Sunnen v. Commissioner, 333 U.S. 591, 599-600 (1948), where a question of fact essential to the judgment in the first case is actually litigated and determined in that proceeding, the parties are bound by the determination in a subsequent proceeding even though the cause of action is different. In order for the judgment in the prior proceeding to be given conclusive effect, it must establish “one of the ultimate facts in issue in the subsequent proceeding.” Yates v. United States, 354 U.S. 298, 338 (1957); The Evergreens v. Nunan, 141 F.2d 927-928, 931 (2d Cir. 1944), affg. 47 B.T.A. 815 (1942), cert. denied 323 U.S. 720 (1944). In The Evergreens v. Nunan, supra at 928, the term ultimate fact in the collateral estoppel context is defined as “one of those facts, upon whose combined occurrence the law raises the duty, or the right, in question.” Such an ultimate fact is distinguished in that case from an evidentiary fact, “from whose existence may be rationally inferred the existence of one of the facts upon whose combined occurrence the law raises the duty, or the right.”6  A conclusion that a taxpayer has filed a false and fraudulent return from which substantial income is omitted is a finding of an ultimate fact. This is one of the ultimate facts required to be shown in order to sustain an addition to tax under section 6653(b), even though it is necessary under that section, in order to find the addition to tax to be due, to make a further ultimate finding of fact that there is an underpayment of tax due to the fraudulent omission of income from the return.7 While section 6653(b) does not include the phrase “with intent to evade tax” as did section 293(b), I.B.C. 1939, this difference in wording was not a change in the proof necessary to show that a taxpayer is liable for an addition to tax for fraud. If an underpayment of tax is due to fraud, it is this fraud which comprises the intent to evade tax. See McGee v. Commissioner, 61 T.C. 249, 257 (1973); Plunkett v. Commissioner, supra at 303. Therefore, to find the further ultimate fact that an underpayment of tax results from the fraudulent omission of income from the return is to find that the underpayment is due to fraud with intent to evade tax. While, as heretofore pointed out, an “ultimate fact” is defined in The Evergreens v. Nunan, supra at 928, for purposes of collateral estoppel as one of the facts “upon whose combined occurrence the law raises the duty, or the right, in question,” we have found no case specifically discussing what is an “ultimate fact” in a case involving an addition to tax under section 6653(b), other than the Considine case, the Amos case, and cases similar to the Amos case. We have therefore analyzed cases applying collateral estoppel in other situations to determine the nature of the facts considered in those cases to be ultimate facts in relation to the issues involved in those cases. From this analysis, we can compare the facts in those cases to which collateral estoppel was held to apply in relation to the issues therein to the fact of fraudulent omission of income from a Federal tax return to the issue of whether there is an underpayment of tax, a part of which is due to fraud. In Local 167 v. United States, 291 U.S. 293 (1934), the Court held Local 167 to be estopped by a prior criminal conviction involving 1929 and prior years from denying that it engaged in a conspiracy prior to 1929. In that case, the issue to be determined was whether petitioner was engaged in a conspiracy in 1930 and should be enjoined from so engaging. The Supreme Court stated in this respect (pp. 298-299): The judgment in the criminal case conclusively established in favor of the United States and against those who were found guilty that within the period covered by the indictment the latter were parties to the conspiracy charged. The complaint in this suit includes the allegations on which that prosecution was based. The defendants in this suit who had been there convicted could not require proof of what had been duly adjudged between the parties. And, to the extent that the answers attempted to deny participation of convicted defendants in the conspiracy of which they had been found guilty, they are false and sham and the district court rightly so treated them. Oklahoma v. Texas, 256 U.S. 70, 85. Cf. Coffey v. United States, 116 U.S. 436, 442. Stone v. United States, 167 U.S. 178, 184. Following the above-quoted holding, the Court discussed the evidence with respect to the existence of a conspiracy for the period following the period to which the prior conviction related, which was the issue in the case. Local 167 v. United States, supra, was one of the cases relied on in Tomlinson v. Lefkowitz, 334 F.2d 262 (5th Cir. 1964), cert. denied 379 U.S. 962 (1965), for the holding that a conviction of a taxpayer under section 7201 estopped him from denying his liability for the addition to tax for fraud under section 6653(b). In Thomas v. United States, 314 F.2d 936 (5th Cir. 1963), remanding a Memorandum Opinion of this Court, the Government was held collaterally estopped by a prior District Court decision involving the taxpayer’s liability for income taxes in 1955 to deny that a farm was operated for a profit in 1955. The issue involved in the second case was whether the farm was operated for profit in the years 1956 through 1958. In Pena-Cabanillas v. United States, 394 F.2d 785 (9th Cir. 1968), it was held in a case involving an indictment of a person for illegally reentering the United States after having been deported that the person was estopped by a prior conviction to deny that he was an alien as of the date of the prior conviction. It was specifically pointed out that evidence was proper with respect to whether his reentry into the United States was legal and his status at the date of that reentry. In Gemma v. Commissioner, 46 T.C. 821, 834 (1966), we held in a case involving the addition to tax for fraud under section 6653(b), but not involving an issue as to the statute of limitations, that the taxpayer was estopped by entry of a plea of guilty to a charge of willful failure to file an income tax return for the year 1956 to deny that his failure to file a return for that year was willful. The case of United States v. Fabric Garment Co., 366 F.2d 530 (2d Cir. 1966), discussed at some length in Considine v. Commissioner, supra at 64-65, held collateral estoppel to apply in a civil action from a conviction in a prior criminal case in circumstances quite comparable to those here involved. In the Fabric Garment case, the issue involved a claim for conversion of goods. In the prior case, Fabric Garment had been convicted of unlawfully disposing of goods made under contract for the Government and making false statements as to the disposition of the goods. The Court held Fabric Garment to be collaterally estopped to deny that it unlawfully disposed of wool serge, but not as to the amount disposed of. See also Monjar v. Commissioner, 13 T.C. 587, 617 (1949). From these cases, it is clear that uniformly courts have held that a fact which by its nature is an ultimate fact, such as the omission of substantial income from a false and fraudulent return which has been decided in a prior case, collaterally estops the person involved in the prior case from denying in a later action that ultimate fact, even though other facts must be found to dispose of the issue involved in the second case. In our view, petitioner in this case is estopped by his conviction in the prior criminal case from denying that he filed a fraudulent Federal income tax return from which was omitted substantial income for each of the years here involved. Having concluded that petitioner is estopped to deny that his returns for the years here in issue were false and fraudulent in that he knowingly failed to report substantial income, it is necessary for us to decide whether respondent has shown by clear and convincing evidence that a part of the underpayment of tax in each of these years was due to this fraud with intent to evade tax. It is not necessary to a conviction under section 7206(1) that the false statement or omission on the return result in an underpayment of tax. See United States v. Rayor, 204 F. Supp. 486 (S.D. Cal. 1962). However, a necessary part of the showing of an addition to tax under section 6653(b) is that there is an underpayment due to fraud. The record here contains petitioner’s tax returns showing all the deductions claimed by petitioner. None of the deductions claimed by petitioner on these returns has been disallowed by respondent. Petitioner’s returns, therefore, constitute a statement of petitioner as to the deductions to which he is entitled in each of the years here in issue. This is clear evidence of petitioner’s deductions. Petitioner’s only business in the years here in issue was that of being an employee, a State employee and a township committeeman and mayor. The only deductible business expenses petitioner could have from his employment were employee business expenses. Petitioner produced no evidence and made no claim that he was entitled to any deductions other than those claimed on his return. From petitioner's returns, respondent has shown the amount of his deductible expenses in each year here in issue. Petitioner does claim that he turned over all the money which he received in cash from suppliers of goods and services to Hamilton Township to the treasurer of the Democratic Club, Mr. Glogoff.8 Petitioner claims that he collected the money only as the agent of the Democratic Club and that he in fact turned the money over to the club treasurer. If petitioner had in fact collected the money merely as an agent for the Democratic Club, he would have received no income from such collection. However, in this case, petitioner is estopped to deny that he received unreported income. As we pointed out in Diamond v. Commissioner, 56 T.C. 530, 541 (1971), amounts received by a taxpayer who acts merely as a conduit for the funds are not required to be included in the recipient’s income. See also Florists’ Transworld Delivery Assn. v. Commissioner, 67 T.C. 333 (1976). Where a person collects funds with no claim of right to such funds but collects such funds merely as agent, the funds do not constitute income to him. The fact that all such funds collected by a person are promptly transmitted to another is indicative that the person collecting the funds has no claim or right to the funds. Lashells’ Estate v. Commissioner, 208 F.2d 430 (6th Cir. 1953).9 In this case, respondent has recognized that petitioner had no claim of right to the part of the cash paid to him by persons supplying goods and services to Hamilton Township which he did, in fact, turn over to the treasurer of the Democratic Club. Respondent, in his computation, eliminated such amounts from the amounts includable in petitioner’s income. The special agent testified that the exhibit showing the computation of this elimination of the funds paid over to the Democratic Club was based on an exhibit prepared for the criminal trial. To the extent petitioner was only a conduit of funds collected by him to the Democratic Club, such funds were not income to petitioner. Since funds collected by petitioner as agent for the Democratic Club and turned over to that club are not income to petitioner, the amounts so turned over are not deductions. Clearly, amounts received by a taxpayer as “kickbacks” under a claim of right are income to that taxpayer. Lydon v. Commissioner, 351 F.2d 539 (7th Cir. 1965), affg. a Memorandum Opinion of this Court; Cain v. Commissioner, 460 F.2d 1243 (5th Cir. 1972), affg. a Memorandum Opinion of this Court. On the basis of this record as a whole, we conclude that respondent has shown by clear and convincing evidence that part of the underpayment in tax in each of the years here in issue was due to petitioner’s failure to report substantial amounts of income on his false and fraudulent returns. In our opinion, this is sufficient to show that part of the underpayment of tax by petitioner in each year here in issue was due to fraud with intent to evade tax. However, there are other indications of fraud in this record. Petitioner received the payments from the suppliers of goods and services to Hamilton Township in cash. Petitioner testified under oath that “every penny that was ever given to me was never solicited” whereas we have found on the testimony of a number of other witnesses in this case that petitioner did solicit funds from suppliers of goods and services to Hamilton Township. There is a cash deposit to petitioner’s savings account in approximately the amount and at approximately the time of one of the cash payments he received from a supplier to Hamilton Township. On the basis of this record as a whole, we conclude that petitioner is collaterally estopped to deny that he filed fraudulent returns which substantially understated his income for each of the years here in issue and that respondent has shown by clear and convincing evidence that an underpayment of tax resulted from these understatements of income, a part of which was due to fraud. Understatement of Income Respondent asserts that petitioner received unreported income in the form of kickbacks from companies doing business with Hamilton Township in the amounts listed in table II. Petitioner contends that any moneys received by him from vendors, such as those listed in table II, in their dealings with Hamilton Township, were “campaign contributions” to the Democratic Club and were turned over to the treasurer of that organization. In other words, petitioner contends he was merely a conduit or agent for any funds given to the Democratic Club and as such, he is not taxable on these payments. We conclude that petitioner did not receive unreported income as to six of the asserted payments (as set forth in the findings of fact, supra); as to the other payments, we conclude that petitioner has failed to meet his burden of proving error in respondent’s determination. In analyzing whether the various payments listed by respondent constitute taxable income to petitioner, we first note that the burden of proof is on petitioner because the statutory notice is presumptively correct. Rule 142(a), Tax Court Rules of Practice and Procedure; Welch v. Helvering, 290 U.S. 111 (1933). The question, as to each of the asserted payments, is whether petitioner has carried his burden of proving that the asserted payment does not represent income taxable to him. North Jersey Equipment Co., Inc. — The record includes credible testimony that petitioner received the asserted payments from North Jersey Equipment Co., Inc., in 1968 and 1970. Petitioner has not persuaded us that respondent’s determinations are incorrect. As to these payments, we hold for respondent. W. E. Timmerman Co. — Respondent’s witness testified that, after selling a street sweeper to Hamilton Township on behalf of W. E. Timmerman Co., he gave petitioner cash in an amount equal to about 5 percent of the price the township paid for the sweeper. This testimony corroborates respondent’s determination that petitioner received $750 on May 5, 1968, from W. E. Timmerman Co. However, the witness also testified that he received a “thank you” letter from the treasurer of the Democratic Club. That letter is in evidence; it is dated May 6, 1968; it thanks the witness for his “generous contribution” to the Democratic Club’s Campaign Committee; it does not indicate the amount the contribution. On May 17, 1968, $1,010 in bills was deposited to the checking account of the Democratic Club’s Campaign Committee. On the basis of this evidence and petitioner’s testimony, we hold for petitioner as to the asserted $750 payment by W. E. Timmerman Co. in 1968. Barrett Paving Co., Inc. — Respondent’s witness testified that all the Barrett Paving Co., Inc., payments to petitioner were made during summer and early fall. This testimony conflicts in part with respondent’s determinations set forth in table II, swpra. Respondent presented no other credible evidence as to the Barrett payments. On the basis of respondent’s evidence and petitioner’s testimony, we hold for petitioner as to the following asserted Barrett payments: 1968 Nov. 27 . $1,050 Dec. 17 . 500 1969 Nov. 3 . 1,000 1970 Nov. 25 . 800 Petitioner has not persuaded us that respondent’s determinations as to the remaining Barrett payments are incorrect and so we hold for respondent as to the remaining Barrett payments. Colonial Garage, Inc. — The record includes credible testimony that petitioner received the asserted payments from Colonial Garage, Inc., in 1969 and 1970. Petitioner has not persuaded us that respondent’s determinations are incorrect. As to these payments, we hold for respondent. Lynn Equipment Co., Inc. — As to the asserted $1,500 payment by Lynn Equipment Co., Inc., in 1970, respondent presented the testimony of an Internal Revenue Service employee who stated that a Mr. Hobart Poole had told him that he had cashed a check (for $3,737.50) from Lynn Equipment Co., Inc., “and gave a portion of this check to Mr. Goodwin.” (Transcript, p. 50.) Just before this statement, respondent’s counsel had been put on notice about the essentially hearsay nature of other testimony of this witness, as follows: The Court: * * * Now, the petitioner has not objected to them, and I am going to admit them. But unless they are corroborated or some other special circumstances are shown, I will not give any weight to that type of hearsay testimony. Mr. Kearney: Your Honor, we will call a witness with respect to the transactions. Mr. Rush’s testimony was directed more to the manner in which he arrived at the payment bases that were contained in the notice of deficiency and in the scope of the other information was necessary with that regard, Your Honor. The Court: Very well. Mr. Kearney: I appreciate the hearsay nature of it, Your Honor. No,— The Court: So long as you understand the situation. Mr. Kearney: Your Honor, we will call a witness with respect to each of the payments. The Court: Fine Mr. Kearney: With respect to Lynn Equipment Company, Mr. Rush, how did you arrive at the adjustment that was made for Lynn Equipment? [Transcript, p. 49.] The testimony as to the asserted Lynn Equipment Co., Inc., payment was given in response to the quoted question by respondent’s counsel. Respondent presented no other evidence on this point. Cf. Cain v. Commissioner, supra. As to this asserted payment, the Court credits petitioner’s denials. (Transcript, pp. 15-22.) We hold for petitioner as to the asserted $1,500 payment by Lynn Equipment Co., Inc., in 1970. Respondent, by amendment to answer, claimed an increased addition to tax under section 6653(b) for the year 1969, stating that in the notice of deficiency, the addition to tax was computed on the basis of the amended return and not on the original return. The addition to tax for fraud under section 6653(b) is to be applied to the difference between the correct tax due and the tax shown on a taxpayer’s timely filed return. Stewart v. Commissioner, 66 T.C. 54 (1976); Breman v. Commissioner, 66 T.C. 61 (1976). A copy of the amended return was not placed in evidence. However, the parties stipulated that petitioner and his wife filed a timely return for 1969, a copy of which was attached to the stipulation. Since amended returns are not the statutory return, although recognized for certain purposes by respondent’s regulations (see Koch v. Alexander, 561 F.2d 1115 (4th Cir. 1977)), we accept this stipulation as to the 1969 return as referring to the statutory timely filed return. Therefore, the addition to tax under section 6653(b) should be computed on the basis of the difference in petitioner’s tax computed in accordance with this opinion and the tax shown on petitioner’s return which has been stipulated in this case. To reflect the conclusions reached herein,10  Decision will be entered under Rule 155. Reviewed by the Court.  Unless indicated otherwise, all section references are to sections of the Internal Revenue Code of 1954, as in effect for the taxable years in issue.   The other contested adjustment, determination of petitioner’s medical expense deduction, is solely derivative; it depends on our resolution of the underreporting issue.   The total amounts paid to Barrett Paving Co., Inc., for work performed for Hamilton Township are comprised of many items. Copies of invoices have been admitted as stipulated exhibits; also a worksheet compiling the invoices has been stipulated. Unfortunately, a comparison of the two reveals a number of invoices that do not appear on the worksheet and also some amounts listed on the worksheet for which there are no invoices in the record. The amounts set forth in the table represent the amounts which appear both on the worksheet and on the invoices.   No Form W-2’s for the year 1968 are in the record.   SEC. 7206. FRAUD AND FALSE STATEMENTS. Any person who— (1) Declaration under penalties of perjury. — Willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter; or.   We are not here concerned with whether, and if so, to what extent, collateral estoppel would apply where a conviction for violation of sec. 7206(1) was based on a charge of falsely subscribing under penalties of perjury to a statement or document other than a Federal income tax return.   One of its definitions of ultimate facts in Black’s Law Dictionary 1691, 1692 (4th ed. 1968 rev.) is the following: “Those facts found in that vaguely defined field lying between evidential facts on the one side and the primary issue or conclusion of law on the other, being but the logical results of the proofs, or, in other words, mere conclusions of fact. Christmas v. Cowden, 44 N.M. 517, 105 P.2d 484, 487.”   In the case of Considine v. Commissioner, 68 T.C. 52, 59 (1977), we discussed at some length the fact that willful, as used in sec. 7206(1) and sec. 7201, has the same meaning and that the bad faith or evil intent referred to in cases discussing the meaning of the word, willful, in the context of these statutes “simply means a voluntary, intentional violation of a known legal duty.” See United States v. Pomponio, 429 U.S. 10, 12 (1976). See also Amos v. Commissioner, 43 T.C. 50, 55 (1964), affd. 360 F.2d 358 (4th Cir. 1965).   At the time of the trial, Mr. Glogoff was deceased.   In Pierson v. Commissioner, T.C. Memo. 1976-281, involving the question of “whether certain payments received” by the taxpayer and “remitted by him to a member of the Yorty Administration” should be included in his income, we held that they should not be so included.   Although the deficiency notice was sent to both petitioner and his wife, Mrs. Goodwin did not file a petition with the Court. Respondent’s counsel assured the Court that respondent intended to abate the assessment made against Mrs. Goodwin to the extent, if any, that the Court redetermines the deficiency against petitioner.