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investigated the leads that were forthcoming and reasonably
susceptible of being checked. Respondent has satisfied the
standards set forth in Holland v. United States, 348 U.S. 121
(1954). Moreover, respondent's evidence that petitioner had
unreported income is clear and convincing, whereas petitioner's
claim that the funds stipulated as having been received by him
were loans is simply not credible. Respondent has proven by
clear and convincing evidence an understatement.
Respondent, of course, must also prove fraudulent intent.
Fraudulent intent may be inferred from various kinds of
circumstantial evidence, or "badges of fraud", including an
understatement of income, inadequate records, implausible or
inconsistent explanations of behavior, and failure to cooperate
with tax authorities. Bradford v. Commissioner, 796 F.2d 303,
307 (9th Cir. 1986), affg. T.C. Memo. 1984-601. A willingness to
defraud another in a business transaction may point to a
willingness to defraud the Government. Solomon v. Commissioner,
732 F.2d 1459, 1462 (6th Cir. 1984), affg. T.C. Memo. 1982-603.
The facts in this case include many "badges of fraud".
Petitioner kept inadequate books and records for his personal
accounts and Interservice. Petitioner gave inconsistent
explanations for the sources of income, alternating between loans
from his wife and loans from Mexican companies. Petitioner
failed to cooperate with the IRS, providing no explanation for
the unreported income for almost 2 years and then failing to
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