C. Richard Roose, Jr. and Betty B. Roose - Page 10

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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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