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a. Petitioner's Sophistication and Experience
Dr. Kalo was an educated person. Additionally, he was
familiar with the tax law and had a better than average knowledge
of foreign investments. Petitioner's knowledge in this area is
sufficient that we believe petitioner knew enough to, at a
minimum, ask for tax advice regarding foreign interest. We find
that Dr. Kalo did not inform his accountant or his financial
advisor of his foreign bank accounts and that this failure to
inform, from a taxpayer with petitioner's sophistication,
indicates fraud.
b. Consistent and Substantial Understatements of Income
The mere failure to report income is not sufficient to
establish fraud. Merritt v. Commissioner, 301 F.2d 484, 487 (5th
Cir. 1962), affg. T.C. Memo. 1959-172; Parks v. Commissioner,
supra at 664. However, consistent and substantial understatement
of income may be strong evidence of fraud. Marcus v.
Commissioner, 70 T.C. 562, 577 (1978), affd. without published
opinion 621 F.2d 439 (5th Cir. 1980). Moreover, a pattern of
consistent underreporting of income, when accompanied by other
circumstances indicating an intent to conceal income, justifies
an inference of fraud. Holland v. United States, 348 U.S. 121,
137 (1954). Petitioners argue that during the years in issue
they reported and paid, on their original income tax returns,
over 94 percent of their tax liability and that this indicates
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