David W. Hill - Page 12

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          121, 137 (1954)  However, petitioner's understatements of income            
          in each of the 3 years involved were both substantial in amount             
          and in proportion to the amounts reported on his original Federal           
          income tax returns.6                                                        
               Extensive dealing in large amounts of cash also constitutes            
          evidence of fraud.  Estate of Mazzoni v. Commissioner, 451 F.2d             
          197, 202 (3d Cir. 1971), affg. T.C. Memo. 1970-37.  Petitioner              
          received cash payments from Mr. Hall approximately every other              
          week.  These cash payments totaled $142,377 in 1989, $76,450 in             
          1990, and $180,608 in 1991.  The reason that dealing in large               
          amounts of cash is evidence of fraud is that cash is difficult to           
          trace unless the taxpayer maintains contemporaneous and accurate            
               Petitioner kept no records to reflect accurately his receipt           
          of large amounts of cash income.  The failure by a knowledgeable            
          taxpayer to maintain adequate records is evidence of fraud.                 
          Galant v. Commissioner, 26 T.C. 354, 365 (1956).  Petitioner was            
          a knowledgeable businessman.  He was the director of a department           
          that had an annual budget in excess of $1.2 million.  In addition           
          to this position, petitioner operated a construction consulting             
          business as a sole proprietorship.  He was a general partner in a           
          real estate partnership, a shareholder in an S corporation, and             

               6Petitioner reported a total taxable income of $127,749 on             
          his returns for the 3-year period, whereas his true taxable                 
          income for those years was determined to be $534,926.19, an                 
          understatement of $407,177.19 for the 3-year period.                        

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