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Cir. 1962), affg. T.C. Memo. 1959-172; Parks v. Commissioner, 94
T.C. 654, 664 (1990). However, consistent and substantial
understatement of income may be strong evidence of fraud. Marcus
v. Commissioner, 70 T.C. 562, 577 (1978), affd. without published
opinion 621 F.2d 439 (5th Cir. 1980). Moreover, a pattern of
consistent underreporting of income, when accompanied by other
circumstances indicating an intent to conceal income, justifies
the inference of fraud. Holland v. United States, 348 U.S. 121,
137 (1954). Dr. Rao concedes that gross income of $40,345,
$49,839, and $47,115 was omitted from his 1986, 1987, and 1988
Federal income tax returns, respectively. Therefore, he has
consistently and substantially understated his income. However,
Dr. Rao has made no attempt to conceal his income; all of his
income was deposited into one of two bank accounts, and these
bank records were given to his tax return preparer and the IRS
agents.
c. Failure To Maintain Adequate Books and Records
Failure to maintain adequate books and records of income is
indicative of fraud. Truesdell v. Commissioner, 89 T.C. 1280,
1302 (1987); Gajewski v. Commissioner, 67 T.C. at 200.
Petitioner kept no books or records. Dr. Rao attempts to blame
his tax return preparer for failing to instruct him on
bookkeeping requirements when, in fact, there is no evidence that
he requested such instruction.
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