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False or misleading statements to the Commissioner's agents
can be evidence of fraudulent intent. Grosshandler v.
Commissioner, 75 T.C. 1, 20 (1980). Petitioner refused to answer
some of Agent Burke's questions, pleading the Fifth Amendment or
on the advice of counsel. As for questions that petitioner did
answer, we do not find petitioner's statements false or
misleading.
A taxpayer's extensive use of cash can be an indication of
fraudulent intent. Bradford v. Commissioner, supra at 308; McGee
v. Commissioner, 61 T.C. 249, 260 (1973), affd. 519 F.2d 1121
(5th Cir. 1975). Petitioner made cash expenditures of
$186,422.02, $61,928.21, and $22,849.32 for the years 1984, 1985,
and 1986 respectively. Petitioner purchased items such as
automobiles, real estate, and automobile insurance with cash when
payment by check would have appeared more conventional.
Petitioner offered no explanation why he used cash for such
substantial expenditures.
Respondent has not shown that petitioner was engaged in, or
attempted to conceal, an illegal activity during the taxable
years 1984 through 1986.
Respondent contends that petitioner's cashing of third-party
checks is evidence of fraudulent intent. See Corrigan v.
Commissioner, T.C. Memo. 1994-31. Petitioner paid $493.98 toward
an auto body repair bill using third-party checks. Petitioner
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