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a. A Pattern of Substantially Understating Income
A pattern of substantially underreporting income over
several years is evidence of fraud. Holland v. United States,
supra at 137-139; Estate of Mazzoni v. Commissioner, 451 F.2d
197, 202 (3d Cir. 1971), affg. T.C. Memo. 1970-37 and T.C. Memo.
1970-144. Petitioner underreported his income by $55,100 in
1988, $114,385 in 1989, and $23,966 in 1990. A pattern of
consistent underreporting of income for several years, especially
when accompanied by other circumstances showing intent to conceal
such as dealing in illegal drugs, is strong evidence of fraud.
Holland v. United States, supra; Patton v. Commissioner, 799 F.2d
166, 171 (5th Cir. 1986), affg. T.C. Memo. 1985-148; Estate of
Mazzoni v. Commissioner, supra; Anderson v. Commissioner, 250
F.2d 242, 250 (5th Cir. 1957), affg. on this issue T.C. Memo.
1956-178.
b. Failing to Maintain Adequate Records
A taxpayer's failure to keep adequate records is a badge of
fraud. Bradford v. Commissioner, supra; Lollis v. Commissioner,
595 F.2d 1189, 1192 (9th Cir. 1979), affg. T.C. Memo. 1976-15.
Petitioner did not keep adequate records.
c. Implausible or Inconsistent Explanations
Implausible or inconsistent explanations of behavior by a
taxpayer to respondent's agents can show that he or she had
fraudulent intent. Bradford v. Commissioner, supra at 307;
Grosshandler v. Commissioner, 75 T.C. 1, 20 (1980). Petitioner
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