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maintain records of his business activities or produce any
records to respondent during the examination. We agree with
respondent. Respondent, through the deemed admissions, has
affirmatively shown various indicia of fraud committed by
petitioner. First, petitioner's understatement of income in 1987
through 1989 indicates fraud. Through the deemed admitted facts,
respondent has established that over a 3-year period petitioner
engaged in a pattern of concealing substantial amounts of income.
Petitioner received substantial income from his involvement in
gambling activities, the sale of illegal narcotics, and the sale
and repair of used cars. Petitioner has admitted that he and
Ms. Campbell had unreported gross income in the amounts of
$126,846, $108,438, and $47,969 for 1987 through 1989,
respectively. This is strong evidence of an intent to evade tax.
Merritt v. Commissioner, 301 F.2d 484, 487 (5th Cir. 1962), affg.
T.C. Memo. 1959-172.
Second, failure to maintain adequate books and records and
failure to produce business records during the examination
process are evidence of fraud. The deemed admissions in
pertinent part establish that petitioner
failed to maintain complete and adequate records of the
activities [he] conducted in cash during the taxable
years 1987, 1988, and 1989 * * * [and that petitioner]
failed to produce any records of [his] business or
personal activities for respondent during the
examination of [petitioner's] income tax liabilities
for the taxable years 1987, 1988, and 1989.
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