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Respondent must show that petitioner acted with fraudulent
intent. The facts in this case include many “badges of fraud”.
Petitioner substantially and consistently understated his income
for each of the years in issue. Petitioner failed to cooperate
with respondent and offered inconsistent explanations for items
on the returns. Petitioner did not maintain complete and
accurate records of his income-producing activities and did not
produce complete records during examination. Even when
petitioner produced documents to substantiate the information on
the returns, the records were in disarray and were incomplete.
In addition, petitioner’s business involved many cash
transactions. Considering his education as an accountant and the
degree of noncompliance with record keeping requirements, we
infer an intention to conceal and deceive.
Petitioner, and his representative, also made false and
misleading statements to Pascual during the examination.
Petitioners’ representative told Pascual that petitioners had no
personal bank accounts, which later proved to be false. There is
also evidence that petitioner attempted to alter records by
changing the numbers on his gasoline log sheets in order to claim
more costs of goods sold and deductions.
Respondent has proven by clear and convincing evidence an
underpayment of tax due to fraud for each year. Petitioner has
not proven that any part of the underpayment is not attributable
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