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Despite his business acumen, petitioner failed to report his
receipt of substantial amounts of income on his 1982, 1983 and
1984 returns. Hughes v. Commissioner, T.C. Memo. 1994-139;
LiButti v. Commissioner, T.C. Memo. 1985-314.
A taxpayer's use of cash to conceal income is evidence of
fraud. Bradford v. Commissioner, 796 F.2d 303, 307-308 (9th Cir.
1986), affg. T.C. Memo. 1984-601; United States v. Chapman, 168
F.2d 997, 1000 (7th Cir. 1948). Petitioner's method of paying
the laborers in cash, and cashing their checks in larger amounts
for himself without a valid business reason, is strong evidence
of fraud.
Petitioner attempted to conceal the receipt of substantial
amounts of income from the partnerships and Newtowne by entering
into a series of transactions that camouflaged receipt of these
funds. For example, petitioner asked Newtowne to endorse the
partnership checks to petitioner in "partial payment for his
consulting services", even though it was understood between the
parties that no such services would be provided. Petitioner also
caused the partnerships to pay him in accordance with the
respective financial consulting agreements.9
9 We note that, despite these agreements, petitioner argued
in his petition that these payments from the partnerships and
(continued...)
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