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Respondent also has established that at least a portion of
each underpayment determined immediately above is attributable to
fraud. We find that petitioner's false statements to Balash
regarding the source of the expenses at issue to be the most
convincing evidence of petitioner's fraudulent intent. Fraud may
be inferred where a taxpayer makes false representations. See
Grosshandler v. Commissioner, 75 T.C. 1 (1980). After Balash
initiated her investigation, she arranged to meet and discuss the
kickback payments with Tubre. Tubre informed petitioner of his
pending meeting with Balash, and petitioner in turn requested
that Tubre, knowing such information to be false, inform Balash
that petitioner was involved with several of Besco's accounts.
Tubre complied with petitioner's request but refused to cooperate
further. After requests by petitioner, however, Tubre provided
petitioner with the names of several Besco customers which
petitioner could represent to Balash as having given rise to the
kickback payments. At a meeting between petitioner and Balash on
December 20, 1984, petitioner used these names in attempt to
explain the income received from Besco and justify the expenses
at issue. The record clearly shows, however, that petitioner
knew these representations were false at the time he made them.
While petitioner contends otherwise, there is no doubt that
petitioner's lie was designed to justify his claiming the expense
deductions. If petitioner had actually incurred the expenses at
issue and honestly believed that such expenses were deductible,
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