Kondamodi S. Rao and B. Satyaveni Rao - Page 18

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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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