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evidence, or "badges of fraud", including an understatement of
income, inadequate records, implausible or inconsistent
explanations of behavior, engaging in illegal activities,
attempting to conceal the illegal activities, and dealing in
cash. Bradford v. Commissioner, 796 F.2d 303, 307 (9th Cir.
1986), affg. T.C. Memo. 1984-601; Meier v. Commissioner, 91 T.C.
273, 297-298 (1988).
The facts in this case include many "badges of fraud".
Petitioner kept inadequate books and records for Stardust and
created false records. Petitioner's explanations for the X marks
on the calendars are implausible and not credible. Petitioner
engaged in illegal activities. Stardust operated as a "cash
only" business.
Respondent has proven by clear and convincing evidence an
underpayment of tax due to fraud for each year. Petitioner has
not proven that any part of the underpayment is not attributable
to fraud. See secs. 6653(b)(2), 6663(b).
Section 6501(c)(1) provides: "In the case of a false or
fraudulent return with the intent to evade tax, the tax may be
assessed, or a proceeding in court for collection of such tax may
be begun without assessment, at any time." Assessment for 1988
is not barred.
Decision will be entered
under Rule 155.
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Last modified: May 25, 2011