Ishveen K. Chopra

United States Tax Court

T.C. Memo. 2025-2

ISHVEEN K. CHOPRA,

Petitioner

v.

COMMISSIONER OF INTERNAL REVENUE,

Respondent

__________

Docket No. 619-23. Filed January 8, 2025.

__________

Ishveen K. Chopra, pro se.

Ka (Matt) Tam and Stephen C. Welker, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

LAUBER, Judge: With respect to petitioner’s Federal income tax

for 2019, the Internal Revenue Service (IRS or respondent) determined

a deficiency of $30,520 and a civil fraud penalty of $22,890 under section

6663(a). 1 The deficiency is attributable to disallowed itemized and busi-

ness expense deductions claimed by petitioner. We will sustain the de-

ficiency and the fraud penalty in full.

FINDINGS OF FACT

These findings are derived from the parties’ Pleadings and Motion

papers, a Stipulation of Facts with attached Exhibits admitted into evi-

dence under Rule 91(f), and the documents and testimony admitted into

1 Unless otherwise indicated, statutory references are to the Internal Revenue

Code, Title 26 U.S.C., in effect at all relevant times, regulation references are to the

Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and

Rule references are to the Tax Court Rules of Practice and Procedure. We round all

monetary amounts to the nearest dollar.

Served 01/08/25

2

[*2] evidence at trial. Petitioner resided in Maryland when the Petition

was timely filed.

Petitioner is a healthcare consultant with multiple academic de-

grees, chiefly in the field of life sciences. These include an M.S. and a

Ph.D. During 2019 she was employed by Kelly Services Global and In-

ternational Business Machines. Her employers furnished the IRS with

Forms W–2, Wage and Tax Statement, reporting total wages of $188,015

from these positions.

During 2019 petitioner allegedly provided additional consulting

services in a nonemployee capacity, likewise in the fields of health care

and life sciences. She reported the expenses she allegedly incurred in

this consulting activity on Schedule C, Profit or Loss From Business,

listing herself as the sole proprietor. She separately reported on Sched-

ule E, Supplemental Income and Loss, her participation in an alleged

partnership, Manticore Consultancy (Manticore), in which she was sup-

posedly a 50% partner.

Petitioner timely filed Form 1040, U.S. Individual Income Tax Re-

turn, for 2019. On this return she reported wages of $188,015, as shown

on the Forms W–2 issued to her. She reported aggregate losses from her

alleged nonemployee consulting of −$94,216, itemized deductions of

$71,924, and taxable income of $22,116. She reported a total tax liabil-

ity of $2,461 and claimed a refund of $27,849.

On Schedule A, Itemized Deductions, petitioner reported medical

expenses of $68,977 and state taxes of $27,200, yielding deductions (af-

ter applicable limitations) of $61,924 and $10,000, respectively. On

Schedule E she reported −$4,388 as her distributive share of a nonpas-

sive loss from Manticore. On Schedule C she reported gross receipts of

zero from her alleged consulting activity and total expenses of $89,828,

as follows:

Item Expense

Advertising $1,479

Car/Truck 13,309

Depreciation/179 24,941

Insurance 2,758

3

[*3] Legal/Professional Services 31,196

Office Expense 1,860

Travel 8,688

Utilities 5,597

Total $89,828

The IRS selected petitioner’s 2019 return for examination and as-

signed the case to a team that included Revenue Agent (RA) Gary Lib-

bin. At all relevant times, RA Libbin’s immediate supervisor was Su-

pervisory Revenue Agent Ashley Gunn. RA Libbin requested documen-

tation from petitioner to substantiate the deductions on her 2019 return.

In response petitioner provided credit card statements for five

nonconsecutive months of 2019. One group of statements showed al-

leged transactions on an American Express (AmEx) account ending in

15008; the other showed alleged transactions on a Discover Bank (Dis-

cover) account ending in 4260. The RA noticed inconsistencies in these

statements, which prompted him to issue a summons to Discover. Dis-

cover supplied the IRS with information about all Discover accounts in

petitioner’s name for 2019. They did not include any account ending in

4260.

To substantiate her claimed business expense deductions peti-

tioner supplied RA Libbin with various documents, including alleged ho-

tel receipts and invoices for purchases of equipment. Several of these

documents appeared altered or suspicious. Hotel receipts misspelled the

hotel’s name and had unusually late checkout times (such as 11:10 p.m.).

Several receipts showed billings to the nonexistent Discover account.

To substantiate her claimed deduction for legal/professional ser-

vices of $31,196, petitioner submitted alleged invoices of $18,718 and

$12,478 from the Chen Law Firm. In response to RA Libbin’s request

for information, that firm stated that it had no billing information for

2019 that matched these purported invoices. However, the firm did pro-

vide RA Libbin with information about payments petitioner had made

to the firm during 2017 and 2018.

To substantiate her reported medical expenses of $68,977, peti-

tioner submitted a purported invoice from her insurer, United

4

[*4] Healthcare. That document stated that United Healthcare declined

to cover any portion of the cost of treatment petitioner allegedly received

for acute appendicitis in 2019 at Johns Hopkins Suburban Hospital

(Johns Hopkins). Noticing inconsistencies within the invoice, RA Libbin

asked Johns Hopkins for billing records relating to petitioner. Johns

Hopkins responded that it possessed no record of any treatment or bill-

ing relating to petitioner for 2019.

RA Libbin concluded that the substantiation petitioner provided

was fraudulent and prepared a Civil Penalty Approval Form. On that

form he recommended that the IRS assert against petitioner a civil fraud

penalty under section 6663 or (in the alternative) an accuracy-related

penalty under section 6662(d). RA Libbin forwarded the case file to Ms.

Gunn for approval. On June 9, 2022, she approved RA Libbin’s initial

determinations by signing the Civil Penalty Approval Form.

On October 27, 2022, the IRS issued petitioner a Notice of Defi-

ciency (Notice) for 2019. The Notice disallowed the medical expense de-

duction in its entirety for lack of substantiation. Because the other item-

ized deduction petitioner had claimed—$10,000 for state and local

taxes—was less than the standard deduction ($12,200), the Notice al-

lowed a standard deduction and disallowed the $10,000 deduction as a

computational adjustment. Finally, the Notice disallowed for lack of

substantiation $79,613 of the deductions claimed on Schedule C (specif-

ically, the deductions for advertising, car/truck, travel, depreciation, and

legal/professional services).

Petitioner timely petitioned this Court, proceeding pro se. She

was uncooperative with respondent’s counsel in preparing the case for

trial, declining to respond to all IRS attempts at communication. On

February 27, 2024, respondent filed a Motion to Compel Production of

Documents, representing that petitioner had failed to produce AmEx

and Discover statements for the remaining 7 months of 2019 and had

refused to produce any tax returns or documents regarding Manticore.

By Order served February 28, 2024, we granted respondent’s Motion,

warning petitioner that, if she did not adequately comply, we would con-

sider imposing sanctions under Rule 104.

On April 5, 2024, respondent filed a Motion to Impose Sanctions.

He represented that petitioner had supplied, in response to our Order,

no additional financial records beyond those she had previously pro-

vided—i.e., 5 months of alleged AmEx and Discover credit card state-

ments—and that she declined to supply copies of Manticore’s 2019 tax

5

[*5] return, reimbursement policy, or partnership agreement. Respond-

ent accordingly requested that we impose appropriate sanctions.

In response to the Motion petitioner asserted that financial rec-

ords other than the 5 months of Discover and AmEx statements “hav[e]

no connection with the 2019 tax-related claimed amounts” and were “ir-

relevant and immaterial.” She asserted that the Manticore tax return

and partnership agreement “are Company confidential and thus are ir-

relevant and immaterial to this case.”

Having heard argument on the Motion to Impose Sanctions at the

start of trial, we overruled petitioner’s relevancy objections. We ruled

that she would be precluded from entering into evidence at trial any

documents that she should have made available, but did not make avail-

able, to respondent’s counsel as directed in our February 28, 2024, Or-

der. And we indicated that we might draw negative inferences from her

nonproduction of the requested material.

OPINION

I. Burden of Proof

The Commissioner’s determinations in a notice of deficiency are

generally presumed correct, and the taxpayer bears the burden of prov-

ing them erroneous. See Rule 142(a). The Commissioner bears the bur-

den of proof regarding fraud, and he must establish fraud by clear and

convincing evidence. See infra pp. 12–13. Section 7491(a) provides that

the burden of proof may shift to the Commissioner on a factual issue if

(among other requirements) the taxpayer “introduces credible evidence

with respect to [that] issue” and “has maintained all records required

under this title.” See § 7491(a)(1), (2)(B). Petitioner does not contend,

and she could not plausibly contend, that she meets these requirements.

II. Governing Legal Standards

Deductions are a matter of legislative grace, and taxpayers bear

the burden of proving their entitlement to any deduction claimed. IN-

DOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992). A taxpayer must

show that she has met all requirements for each deduction and must

keep books or records that substantiate expenses underlying it. § 6001;

Roberts v. Commissioner, 62 T.C. 834, 836 (1974). Failure to keep and

present such records counts heavily against a taxpayer’s attempted

proof. Rogers v. Commissioner, T.C. Memo. 2014-141, 108 T.C.M. (CCH)

39, 43.

6

[*6] Section 162(a) allows a deduction for “ordinary and necessary ex-

penses paid or incurred during the taxable year in carrying on any trade

or business.” Whether an expenditure is “ordinary and necessary” is

generally a question of fact. Commissioner v. Heininger, 320 U.S. 467,

475 (1943). An expenditure is “necessary” if it is “directly connected

with” and “appropriate and helpful” to the taxpayer’s business. Welch

v. Helvering, 290 U.S. 111, 113 (1933); Treas. Reg. § 1.162-1(a).

Section 274(d) sets forth heightened substantiation requirements

for certain types of expenses. As in effect during 2019, section 274(d)

made these strict requirements applicable for “any traveling expense

(including meals and lodging while away from home)” and “any listed

property.” “Listed property” was defined to include “any passenger au-

tomobile.” § 280F(d)(4)(A)(i); Treas. Reg. § 1.280F-6(b)(1)(i). With re-

spect to travel expenses and listed property, section 274(d) provided that

no deduction shall be allowed “unless the taxpayer substantiates by ad-

equate records or by sufficient evidence corroborating the taxpayer’s

own statement” the amount of the expense, the time and place of the

travel, and “the business purpose of the expense or other item.” See

Temp. Treas. Reg. § 1.274-5T(c).

For expenses governed by section 274(d), “[w]ritten evidence has

considerably more probative value than oral evidence,” and “the proba-

tive value of written evidence is greater the closer in time it relates to

the expenditure.” Temp. Treas. Reg. § 1.274-5T(c)(1). Substantiation

by “adequate records” generally requires the taxpayer to “maintain an

account book, diary, log, statement of expense, trip sheets, or similar

record,” as well as evidence documenting the expenditures. Id. sub-

para. (2). To substantiate business use of vehicles an actual contempo-

raneous log is not strictly required, but records made at or near the time

of the expenditure have greater probative value than records created

subsequently. Id. subparas. (1) and (2).

III. Itemized Deductions

For 2019 petitioner reported unreimbursed medical expenses of

$68,977, yielding a deduction of $61,924 after the applicable limitation.

See § 213(a), (f) (allowing a deduction for medical expenses, not compen-

sated by insurance or otherwise, to the extent such expenses exceed

7.5% of the taxpayer’s adjusted gross income). Petitioner bears the bur-

den of proving that she paid medical expenses and that they were not

reimbursed. See Weaver v. Commissioner, T.C. Memo. 1984-634, 49

T.C.M. (CCH) 249, 251–52.

7

[*7] Petitioner asserts that she paid $68,977 to Johns Hopkins for

treatment of acute appendicitis during 2019 and that United

Healthcare, her insurer, declined to pay a penny of this charge. To sub-

stantiate this assertion she produced a single document—a purported

invoice from United Healthcare dated November 29, 2019. This docu-

ment shows charges of $68,977 for a 3-day hospital stay, “total insurance

payments” of zero, and a balance due of $68,977.

For three reasons we conclude that this document was digitally

altered and is fraudulent. First, the document shows an impossible, 9-

digit, phone number for United Healthcare: 800-624-822. Second, the

document unaccountably shows no explanation of the denial of benefits.

Third, petitioner at trial offered no plausible explanation why her in-

surer would deny a claim for the cost of surgery requiring a 3-day hos-

pital stay.

Alerted by the suspicious nature of the purported invoice, RA Lib-

bin issued a summons to Johns Hopkins. In response the hospital stated

that it had no record of treating petitioner as a patient during 2019 and

no billing records matching the $68,977 of services shown on the pur-

ported invoice from United Healthcare. We accordingly sustain in full

the disallowance of the claimed medical expense deduction.

The only other itemized deduction petitioner claimed was $10,000

for state and local taxes. Because this amount was less than the stand-

ard deduction ($12,200), the IRS allowed the standard deduction and

disallowed the $10,000 deduction as a computational adjustment. We

sustain those adjustments.

IV. Business Expense Deductions

At trial the parties agreed that petitioner actually had no Sched-

ule C consulting business during 2019 and that the expenses she re-

ported on Schedule C were expenses allegedly incurred on behalf of

Manticore. At trial we asked her why she would have incurred $89,828

of unreimbursed expenses on behalf of a partnership of which she was

only a 50% partner. She replied that it was “common work that [she]

had to pay for” and was related to “learnings” that she could “bring back

to the company.” We did not find this explanation credible.

A partner may not deduct partnership expenses on her individual

tax return unless the partnership agreement specifically requires that

such expenses be paid out of the taxpayer’s own pocket. See, e.g.,

Cropland Chem. Corp. v. Commissioner, 75 T.C. 288, 295 (1980), aff’d,

8

[*8] 665 F.2d 1050 (7th Cir. 1981) (unpublished table decision); Klein v.

Commissioner, 25 T.C. 1045, 1051–52 (1956). Petitioner asserts that

Manticore’s partnership agreement required her to pay these expenses.

But she refused to supply a complete copy of Manticore’s partnership

agreement or a copy of its 2019 partnership tax return, citing “confiden-

tiality.”

There is no all-purpose “confidentiality” privilege in the Tax

Court (or in any other court). Petitioner cannot plausibly urge that the

partnership agreement required her to pay these expenses while refus-

ing to produce a copy of the agreement. For this reason alone, petitioner

has failed to show that she is entitled to the deductions claimed on her

Schedule C.

Apart from this threshold problem, petitioner wholly failed to

substantiate the deductions claimed. The credit card statements she

produced were intentionally incomplete and appear to have been altered

or forged. The same is true for her purported invoices. And we did not

find her testimony in any respect credible.

A. Section 162 Expenses

1. Advertising Expense

Petitioner claimed a deduction of $1,479 for advertising expenses.

To support this deduction she submitted a purported invoice from

Tintash showing a $1,479 balance due for “business card design and bro-

chure for BD.” At trial petitioner did not explain the meaning of “BD.”

The invoice does not mention Manticore. Rather, it is billed to “Ishveen

Chopra, Accounts Payable,” at her home address.

The purported invoice shows no evidence of payment. To substan-

tiate payment of $1,479, petitioner submitted an alleged credit card

statement for a Discover account ending in 4260. According to Dis-

cover’s records, petitioner during 2019 had no account ending in 4260.

We therefore sustain the disallowance of this deduction.

2. Depreciation and Section 179 Expense

Section 167(a) allows a deduction for the exhaustion, wear and

tear, or obsolescence of property used in a trade or business. Section 179

allows a taxpayer to elect to deduct as a current expense, within certain

dollar limits, the cost of section 179 property in the year such property

is placed in service. See § 179(a) and (b). To qualify as section 179

9

[*9] property, the equipment must (among other things) be acquired for

use “in the active conduct of a trade or business.” See § 179(d)(1)(C).

Petitioner claimed a deduction of $29,941 for various items alleg-

edly used in Manticore’s consulting business. As far as the record re-

veals, Manticore had no gross receipts for 2019: Petitioner showed zero

gross receipts on her Schedule C, and she refused to submit a copy of

Manticore’s 2019 tax return into evidence. Petitioner thus failed to es-

tablish at trial that Manticore during 2019 was engaged “in the active

conduct of a trade or business.” See § 179(d)(1)(C). For that reason

alone, petitioner has failed to prove her entitlement to a section 179 de-

duction.

Apart from this threshold problem, petitioner has failed to sub-

stantiate any of the claimed deductions:

• Petitioner allegedly paid $6,045 to B&H Photo for computer

equipment, a smartphone, and a scanner. She supplied no credi-

ble evidence that these items were used for business rather than

personal purposes. The purported invoices from B&H Photo show

the purchase prices as being charged to a Discover credit card

ending in 4260. Because petitioner had no Discover account end-

ing in 4260, we find that these invoices are fraudulent. For both

reasons we sustain the disallowance of these deductions.

• Petitioner allegedly paid $2,070 to Home Depot for a desk and

related office furniture used in her home. She supplied no credi-

ble evidence that these items were used for business rather than

personal purposes. The purported invoice from Home Depot

shows the purchase price as being charged to a Discover credit

card account ending in 4260. Because petitioner had no Discover

account ending in 4260, we find that this invoice is fraudulent.

For both reasons we sustain the disallowance of this deduction.

• Petitioner allegedly paid $14,511 to Definitive Healthcare for da-

tabases. The purported invoice from Definitive Healthcare shows

no evidence of payment. To substantiate payment of $14,511, pe-

titioner submitted a purported credit card statement for a Dis-

cover account ending in 4260. Because petitioner had no Discover

account ending in 4260, we find that this charge is fraudulent.

We accordingly sustain the disallowance of this deduction.

• Petitioner allegedly paid $2,578 to OriginLab for software. As

proof of payment she submitted a purported AmEx credit card

10

[*10] statement. As explained below, the purported AmEx statements

she offered into evidence appear to have been digitally altered in

many respects. See infra pp. 16–17. In any event, if she did in

fact purchase this software, she failed to establish what function

the software performed and that it was used in a business actu-

ally conducted by Manticore (rather than for personal purposes).

We accordingly sustain the disallowance of this deduction.

3. Legal and Professional Services

Petitioner allegedly paid $31,196 to Chen Law Firm, also known

as NAmILG/Chen, for immigration services relating to her visa status.

The purported invoices show payments made via PayPal on March 4 and

24, 2019. To substantiate these payments petitioner submitted a pur-

ported credit card statement for a Discover account ending in 4260,

showing payments totaling $31,196 to NamILG/Chen. Because peti-

tioner had no Discover account ending in 4260, we find that this invoice

is fraudulent.

RA Libbin asked Chen Law Firm for any billing or payment in-

formation relating to petitioner or Manticore for 2019. In response the

firm stated that it had no billing information for 2019 that matched the

purported invoices of $18,718 and $12,478. The firm indicated that it

had provided services to (and received payments from) petitioner during

2017 and 2018, but not during 2019.

In any event, the alleged payments to Chen Law Firm were for

legal services relating to petitioner’s personal immigration status. She

failed to prove at trial that these expenses should properly be character-

ized as business rather than personal expenses. Even if petitioner had

established that these were legitimate expenses she actually paid, we

would deny the claimed deduction for that reason.

B. Expenses Subject to Section 274

1. Travel Expenses

Petitioner claimed deductions of $8,688 for hotel expenses during

2019. She submitted purported receipts from Marriott hotels (for 6-day

stays in Chicago, San Diego, and New Orleans), from Hilton (for a 5-day

stay in Houston), and from 1 Hotel Central Park (for a 6-day stay in New

York).

11

[*11] We find that these documents were digitally manipulated and are

fraudulent. The purported invoices from Marriott show its website ad-

dress as www.mariott.com, omitting an “R” from the company’s name.

Three invoices show suspiciously late check-out times (4:43 p.m., 5:14

p.m., and 11:10 p.m.). And the invoices do not show the full range of

state and local taxes and related charges that commonly appear on hotel

receipts.

Assuming arguendo that one or more of these receipts are genu-

ine, petitioner failed to satisfy the strict substantiation requirements of

section 274(d). She testified vaguely that she visited Houston and Chi-

cago for conferences and the other cities “on business,” with no elabora-

tion about the type of conference or the nature of the business allegedly

conducted. She thus failed to substantiate “the business purpose of the

expense” by “adequate records or by sufficient evidence corroborating

[her] own statement.” See § 274(d); Temp. Treas. Reg. § 1.274-5T(c).

2. Vehicle Expenses

Petitioner reported vehicle expenses of $13,309, allegedly in-

curred on behalf of Manticore. She testified that the trips were for client

meetings or conventions, many in such distant venues as New York,

Massachusetts, Georgia, North Carolina, West Virginia, Mississippi, Il-

linois, and Louisiana. Two of the trips were to alleged conferences in

Chicago and New Orleans, for which we have found her hotel receipts to

be fictitious. Because she refused to supply a copy of Manticore’s 2019

tax return, there is no evidence that the scale of its activities could have

required that she take eight lengthy out-of-state trips.

In an effort to substantiate these trips, petitioner submitted a

QuickBooks log. This log shows 72 trips in her Ford Focus totaling

22,947 miles. Petitioner did not establish when the log was created, and

she offered no contemporaneous notes to support the entries. The log

includes no odometer readings, and petitioner did not otherwise offer

odometer readings into evidence. The log does not show the address of

any of the 72 destinations allegedly visited. Most importantly, the cryp-

tic explanations do not establish the business purpose of the alleged

trips. Many entries are described simply as a “lunch,” a “meeting,” or a

“conference,” employing acronyms and abbreviations that did nothing to

establish a genuine business nexus.

This log, which petitioner’s testimony did not elucidate, falls short

of meeting the strict substantiation requirements of section 274. On the

12

[*12] basis of the evidence she submitted, we cannot ascertain the busi-

ness purpose of her alleged travels. We therefore sustain the disallow-

ance of a deduction for vehicle expenses.

V. Civil Fraud Penalty

A. Supervisory Approval

Section 6751(b)(1) provides that “[n]o penalty under this title

shall be assessed unless the initial determination of such assessment is

personally approved (in writing) by the immediate supervisor of the in-

dividual making such determination.” See Baxter v. Commissioner, 910

F.3d 150, 169 n.3 (4th Cir. 2018), aff’g T.C. Memo. 2017-150. As a

threshold matter, respondent must show that he complied with section

6751(b)(1). See Chai v. Commissioner, 851 F.3d 190, 221 (2d Cir. 2017)

(ruling that “compliance with § 6751(b) is part of the Commissioner’s

burden of production” under section 7491(c)), aff’g in part, rev’g in part

T.C. Memo. 2015-42.

In Belair Woods, LLC v. Commissioner, 154 T.C. 1, 14–15 (2020),

we explained that the “initial determination” of a penalty assessment is

typically embodied in a letter “by which the IRS formally notifie[s] [the

taxpayer] that the Examination Division ha[s] completed its work and

. . . ha[s] made a definite decision to assert penalties.” Once the Com-

missioner introduces evidence sufficient to show written supervisory ap-

proval, the burden shifts to the taxpayer to show that the approval was

untimely, i.e., “that there was a formal communication of the penalty [to

the taxpayer] before the proffered approval” was secured. Frost v. Com-

missioner, 154 T.C. 23, 35 (2020).

Respondent has produced the Civil Penalty Approval Form by

which RA Libbin recommended assertion of a fraud penalty against pe-

titioner. RA Libbin’s immediate supervisor, Ms. Gunn, signed that form

on June 9, 2022. The recommendation to assert fraud penalties was first

communicated to petitioner in the Notice dated October 27, 2022, with

an attached Form 4549–A, Income Tax Examination Changes, showing

the penalty calculation. Respondent has thus met his burden of produc-

tion by showing timely approval. See ibid.

B. Existence of Fraud

“If any part of any underpayment of tax required to be shown on

a return is due to fraud,” section 6663(a) imposes a penalty of 75% of the

portion of the underpayment due to fraud. Respondent has the burden

13

[*13] of proving fraud, and he must prove it by clear and convincing ev-

idence. See § 7454(a); Rule 142(b); Richardson v. Commissioner, T.C.

Memo. 2006-69, 91 T.C.M. (CCH) 981, 996, aff’d, 509 F.3d 736 (6th Cir.

2007).

To sustain his burden, respondent must establish two elements:

(1) that there was an underpayment of tax for each year at issue and

(2) that at least some portion of the underpayment for each year was due

to fraud. Hebrank v. Commissioner, 81 T.C. 640, 642 (1983). If the Com-

missioner proves that some portion of an underpayment was due to

fraud, then the “entire underpayment shall be treated as attributable to

fraud” unless the taxpayer shows, by a preponderance of the evidence,

that the balance was not so attributable. § 6663(b).

Respondent has carried his burden of establishing, by clear and

convincing evidence, that petitioner understated her income and under-

paid her tax for 2019. And respondent clearly proved that a significant

portion of the underpayment (at least) was due to fraud.

Fraud is intentional wrongdoing designed to evade tax believed

to be owing. Neely v. Commissioner, 116 T.C. 79, 86 (2001). The exist-

ence of fraud is a question of fact to be resolved upon consideration of

the entire record. Estate of Pittard v. Commissioner, 69 T.C. 391, 400

(1977). Fraud is not to be presumed or based upon mere suspicion.

Petzoldt v. Commissioner, 92 T.C. 661, 699–700 (1989). But because di-

rect proof of a taxpayer’s intent is rarely available, fraudulent intent

may be established by circumstantial evidence. Id. at 699.

The Commissioner satisfies his burden of proof by showing that

“the taxpayer intended to evade taxes known to be owing by conduct

intended to conceal, mislead, or otherwise prevent the collection of

taxes.” Parks v. Commissioner, 94 T.C. 654, 661 (1990). The taxpayer’s

entire course of conduct may be examined to establish the requisite in-

tent, and an intent to mislead may be inferred from a pattern of conduct.

Webb v. Commissioner, 394 F.2d 366, 379 (5th Cir. 1968), aff’g T.C.

Memo. 1966-81; Stone v. Commissioner, 56 T.C. 213, 224 (1971).

Circumstances that may indicate fraudulent intent, often called

“badges of fraud,” include, but are not limited to: (1) understating in-

come, (2) keeping inadequate records, (3) giving implausible or incon-

sistent explanations of behavior, (4) concealing income or assets, (5) fail-

ing to cooperate with tax authorities, (6) engaging in illegal activities,

(7) supplying incomplete or misleading information to a tax return

14

[*14] preparer, (8) providing testimony that lacks credibility, (9) filing

false documents (including false tax returns), (10) failing to file tax re-

turns, and (11) dealing in cash. Schiff v. United States, 919 F.2d 830,

833 (2d Cir. 1990) (per curiam); Bradford v. Commissioner, 796 F.2d

303, 307–08 (9th Cir. 1986), aff’g T.C. Memo. 1984-601; Parks, 94 T.C.

at 664–65; Recklitis v. Commissioner, 91 T.C. 874, 910 (1988); Morse v.

Commissioner, T.C. Memo. 2003-332, 86 T.C.M. (CCH) 673, 675, aff’d,

419 F.3d 829 (8th Cir. 2005). No single factor is dispositive, but the

existence of several factors “is persuasive circumstantial evidence of

fraud.” Vanover v. Commissioner, T.C. Memo. 2012-79, 103 T.C.M.

(CCH) 1418, 1420–21.

Several of these factors have no application here. Petitioner pre-

pared her own tax returns, so she had no occasion to provide false infor-

mation to a return preparer. Because the underpayments were due to

fictitious deductions rather than unreported income, “dealing in cash,”

“concealing income or assets,” and “engaging in illegal activities” have

no relevance to this case. But we conclude that at least six badges of

fraud show that petitioner acted with fraudulent intent.

1. Understating Income

Substantially understating income is strong evidence of fraud,

particularly if the understatement is not satisfactorily explained. See

id. at 1421. An understatement of income can be accomplished by over-

stating deductions as well as by omitting income. See Gould v. Commis-

sioner, 139 T.C. 418, 446–47 (2012), aff’d, 552 F. App’x 250 (4th Cir.

2014); Estate of Temple v. Commissioner, 67 T.C. 143, 161 (1976). Re-

spondent’s adjustments, which we have sustained, increased petitioner’s

taxable income to $161,453—seven times larger than the amount she

reported, $22,116. The magnitude of the difference supplies evidence of

fraud.

2. Keeping Inadequate Records

Petitioner not only failed to supply adequate records of her ex-

penses but actively falsified documents. She repeatedly refused to pro-

vide, to respondent’s counsel or to the Court, a complete set of credit card

statements for 2019, a copy of Manticore’s partnership agreement, or a

copy of Manticore’s 2019 tax return. See Meier v. Commissioner, 91 T.C.

273, 302 (1988) (holding that a taxpayer’s inadequate recordkeeping ev-

idenced an intent “to conceal information” from the IRS). And the doc-

uments she did supply were digitally manipulated to a large degree.

15

[*15] 3. Giving Implausible or Inconsistent Explanations

Petitioner offered to the IRS and the Court a variety of implausi-

ble explanations. She submitted five hotel receipts that are suspicious

in many respects. See supra pp. 10–11. When asked at trial about the

unusually late check-out times appearing on these receipts, she asserted

that she was a member of each hotel’s “reward program.” She could not

explain at trial what level of membership in a reward program would

enable check-out times as late as these. In her Posttrial Brief she said

she “does not handle administrative work such as membership renew-

als.”

One purported credit card statement lists transactions out of

chronological order. Two alleged purchases from B&H Photo on Janu-

ary 12 and 13—both of which we have found to be fictitious, see supra p.

9—appear on the statement before a transaction dated January 10. By

way of explanation petitioner asserted that the items she purchased

were “back ordered.” That explanation was nonsensical. It is obvious

that petitioner, when digitally manipulating the document, put the pur-

ported B&H Photo transactions in the wrong place.

In response to a summons, Discover informed RA Libbin that it

had no record of any Discover account in petitioner’s name ending in

4260. Confronted with this quandary, petitioner theorized that Discover

had neglected to provide the IRS with information about her jointly held

accounts. This explanation was not credible. The Discover account was

titled in the name of petitioner individually: “Ishveen K Chopra,” fol-

lowed by her address of record. And even if it were a joint account, Dis-

cover would presumably have identified it in response to a summons

seeking petitioner’s records.

We have determined that the purported invoice from United

Healthcare was fraudulent. See supra p. 7. When asked at trial why

her insurer would have declined coverage for a three-day hospital stay,

petitioner testified that her coverage was a “minimal insurance” plan

that only covers “normal physician visits,” not surgeries. Petitioner fur-

ther insisted that United Healthcare provided her with no explanation

whatever for the denial of coverage. This implausible testimony, like

that described above, provides additional evidence of fraudulent intent.

4. Failing to Cooperate with Tax Authorities

Throughout these proceedings petitioner failed to cooperate with

respondent. RA Libbin asked her to supplement her production of

16

[*16] financial records, but she refused. Eventually he had to summons

her bank statements. See Good v. Commissioner, T.C. Memo. 2012-323,

104 T.C.M. (CCH) 595, 608 (finding lack of cooperation where revenue

agent was forced to summons taxpayer’s bank records).

We ordered petitioner to produce AmEx and Discover statements

for the entire 2019 year. These documents (if they existed) were im-

portant given respondent’s contention that the 5 months of statements

she had supplied were fictitious. Petitioner refused to comply with our

Order, asserting that financial records other than the 5 months of state-

ments “hav[e] no connection with the 2019 tax-related claimed amounts”

and were “irrelevant and immaterial.” She refused to supply a copy of

Manticore’s 2019 partnership return—asserting that it was “irrelevant

and immaterial to this case”—even though Manticore was the entity on

whose behalf she allegedly paid $89,828 of expenses. Because of her

repeated lack of cooperation, we ultimately imposed sanctions. See su-

pra p. 5.

On March 12, 2024, petitioner filed a Motion requesting that her

trial be conducted remotely. She represented that she had discussed the

motion with respondent’s counsel and that he had no objection. Both

representations were false, and we denied the Motion. Her duplicitous

and obstructive behavior throughout this case is a badge of fraud.

5. Lack of Credibility of Taxpayer’s Testimony

We did not find petitioner to be a credible witness. We have noted

above numerous points on which we found her testimony to lack credi-

bility. Her primary contention—that she should not be held responsible

for mistakes of the businesses with which she dealt—was wholly uncon-

vincing. Discover, United Healthcare, Johns Hopkins, and Chen Law

Firm all denied having records matching her claims. We trust their

word over hers.

6. Filing False Documents

Petitioner filed a false income tax return for 2019, claiming de-

ductions for expenditures that did not exist. And she supplied multiple

false documents to respondent and the Court. We have already noted

many indicia of digitally manipulated documents. Here are a few more:

• Different account numbers appear within the November Discover

statement. The statement purports to be her credit card

17

[*17] statement for a card ending in 4260, but the statement elsewhere

lists an account ending in 9954.

• Inconsistent dates and amounts are shown for “required mini-

mum payments.” The October AmEx statement lists the mini-

mum payment—on the same page—as both $25 and $27. The

March Discover statement lists both April 23 and May 23 as the

payment due date.

• The billing periods on the April and November Discover state-

ments list a date range of 30 days, but they show a billing period

of only 28 days. The February AmEx statement lists a reward

balance of $91 as of February 30, 2019—a date that does not exist.

• The June Discover statement lists an opening cashback rewards

balance of $11.40, a monthly accrual of $0.55, and a closing bal-

ance $19.45. The sum of the first two amounts is $11.95.

Considering the record as a whole, we find that respondent has

established, by clear and convincing evidence, that petitioner’s under-

payment of tax for 2019 was attributable to fraud. Petitioner did not

establish, by a preponderance of the evidence, that any portion of the

underpayment was not attributable to fraud. See § 6663(b). We thus

sustain respondent’s determination that petitioner for 2019 is liable for

a civil fraud penalty of $22,890. 2

To reflect the foregoing,

Decision will be entered for respondent.

2 Given our disposition we need not consider respondent’s alternative determi-

nation that petitioner is liable for an accuracy-related penalty.