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e. Substantially Understating Income
A pattern of substantially underreporting income tax
liability for several years may be evidence of fraud. Holland v.
United States, 348 U.S. 121, 137-139 (1954); Estate of Mazzoni v.
Commissioner, 451 F.2d 197, 202 (3d Cir. 1971), affg. T.C. Memo.
1970-144; Rogers v. Commissioner, 111 F.2d 987, 989 (6th Cir.
1940), affg. 38 B.T.A. 16 (1938). Petitioner substantially
underreported income of $48,365 for 1985, $56,761 for 1986, and
$34,382 for 1987.
f. Implausible or Inconsistent Explanations of
Behavior
Implausible or inconsistent explanations of behavior may
be a badge of fraud. Bradford v. Commissioner, 796 F.2d at 307-
308. Petitioner’s contention that he did not know that he had
to file tax returns and pay income tax for the years in issue
is implausible and inconsistent with his plea agreement.
4. Open Defiance as a Defense to Fraud
Petitioner contends that the fact that he sent several
letters to respondent shows that he is not liable for fraud. We
disagree.
Petitioner relies on Raley v. Commissioner, 676 F.2d 980,
984 (3d Cir. 1982), revg. T.C. Memo. 1980-571. In Raley, the
U.S. Court of Appeals for the Third Circuit held that filing
false Forms W-4 and an invalid tax return did not establish
fraud where the taxpayer clearly informed various people in the
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