Peter S. Pau and Susanna H. Pau - Page 21

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               The inadequacy of the records was not due to negligence on             
          the part of petitioners, but fraud.  Petitioners' reliance on               
          Tabbi v. Commissioner, T.C. Memo. 1995-463, is misplaced.  In               
          that case, the Court held that the taxpayer was not liable for              
          the civil fraud penalty, in part because his failure to keep                
          books and records, other than checks, was due to the fact that he           
          was "disorganized and because he could not afford accountants."             
          Id.   Other factors also weighed in his favor.  In the instant              
          case,  petitioners present only their self-serving testimony that           
          they were disorganized, which we do not find credible.                      
          Petitioners were able to prove every expense they had claimed for           
          Sand Hill.  They also had ready access to monthly bank statements           
          and the ability to use them, which petitioner showed in                     
          conducting his deposits analysis.  Even more telling, petitioners           
          could afford and did use an accountant but intentionally failed             
          to provide him with accurate records.  See Korecky v.                       
          Commissioner, 781 F.2d 1566, 1568-1569 (11th Cir. 1986), affg.              
          T.C. Memo. 1985-63; Merritt v. Commissioner, 301 F.2d 484, 486-             
          487 (5th Cir. 1962), affg. T.C. Memo. 1959-172.                             
               3.  Implausible or Inconsistent Explanations of Behavior               
               Petitioners refused to acknowledge their receipt of the                
          $840,000 from Sanrio until after respondent's answer, even though           
          petitioner earlier had mentioned a potential problem with the               
          gross receipts reported on the return, and despite the fact that            
          the $840,000 was specifically brought up in their conversation              
          with Clement on August 1, 1994.  Petitioner subsequently stated             

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