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documentation, such as bank statements, for the Drug Topics book
totals. Petitioners also argue that they did not conceal or
attempt to divert cash without recording cash receipts.
Fraudulent intent may be inferred from various kinds of
circumstantial evidence, or "badges of fraud", including
understatement of income, inadequate records, or implausible or
inconsistent explanations of behavior. Bradford v. Commissioner,
796 F.2d 303, 307 (9th Cir. 1986), affg. T.C. Memo. 1984-601.
The record in this case is replete with clear and convincing
evidence of petitioners' fraudulent intent.
Petitioners understated their income in each of the years in
issue by intentionally failing to report receipts from credit
card sales that were deposited in the Bank One and Huntington
Bank accounts, intentionally failing to report receipts from
coupon redemptions that were deposited in various Peoples Savings
accounts, and intentionally failing to report numerous special
deposits during the years in issue. See Webb v. Commissioner,
supra at 379; Marcus v. Commissioner, 70 T.C. 562, 577 (1978),
affd. without published opinion 621 F.2d 439 (5th Cir. 1980).
Although petitioners had each received 3 months of training
in the accounting system that they used in the store, they failed
to utilize the system to keep accurate and adequate records.
They deliberately distorted the accounting system by failing to
record certain store receipts. By providing the distorted
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