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Courts have relied on a number of indicia of fraud, and the
existence of several factors is persuasive circumstantial
evidence of fraud. Solomon v. Commissioner, 732 F.2d 1459, 1461
(6th Cir. 1984), affg. T.C. Memo. 1982-603. The factors relevant
here are: (1) Substantial understatements of income; (2) dealing
in excessive amounts of cash; (3) maintenance of inadequate
records; and (4) implausible or inconsistent explanations of
behavior. Bradford v. Commissioner, 796 F.2d 303, 307 (9th Cir.
1986), affg. T.C. Memo. 1984-601. Upon examination of the entire
record, we conclude that petitioner's underpayment of Federal
income taxes for 1989, 1990, and 1991 is attributable to fraud.
Petitioner substantially understated his taxable income on
the original Federal income tax returns filed for each of the
years in issue. Such consistent and substantial understatement
of income constitutes strong evidence of fraudulent intent.
Grudin v. Commissioner, 536 F.2d 295, 296 (9th Cir. 1976), affg.
T.C. Memo. 1974-251; Ruark v. Commissioner, 449 F.2d 311, 313
(9th Cir. 1971), affg. T.C. Memo. 1969-48; Otsuki v.
Commissioner, supra at 107-108; see also Rogers v. Commissioner,
111 F.2d 987, 989 (6th Cir. 1940), affg. 38 B.T.A. 16 (1938)
(held that discrepancies of 100 percent and more between real net
income and the reported income for 3 successive years strongly
evidence an intent to defraud the Government). We are mindful
that fraud cannot be inferred from a mere inadvertent
understatement of income. Holland v. United States, 348 U.S.
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