In Re Estate of R. L. Adame, Deceased, Consuelo C. Adame, Individually and and Consuelo C. Adame, Surviving Wife v. Commissioner of Internal Revenue

LUMBARD, Chief Judge.

This appeal questions whether the deceased taxpayer’s failure to declare as income monies he diverted to himself from school funds which he controlled can be considered as having been done with willful and fraudulent intent to evade taxes as the Tax Court held, 37 T.C. 807 (1962), although it was settled law at the times in question, 1948 through 1953, that money so illegally diverted was not taxable income. We hold that the failure to declare such unlawful gains could not be evidence of fraudulent intent. As there is no other evidence sufficient to support the Tax…