-37-
(1971), affd. 470 F.2d 87 (1st Cir. 1972); Stone v. Commissioner,
56 T.C. 213, 227-228 (1971).
2. Underpayment of Tax for the Years in Issue
Petitioners argue that respondent has not proven by clear
and convincing evidence that petitioners underpaid tax.
Respondent may prove that an underpayment exists by proving
that the taxpayer had a likely source of unreported income,
Holland v. United States, 348 U.S. at 137-138; or, if a taxpayer
alleges that he or she had a nontaxable income source, by
disproving the alleged nontaxable source, United States v.
Massei, 355 U.S. 595 (1958).
Petitioners underreported their income by $82,961 in 1983,
$45,598 in 1984, $8,608 in 1985, $60,788 in 1986, and $29,822 in
1987. Petitioner-husband testified that petitioners earned about
$20,000 per month from their saunas. Petitioners reported
significantly less than that amount each year in issue. We
conclude that respondent has proven by clear and convincing
evidence that petitioners unreported their income for each of the
years in issue.
3. Fraudulent Intent
Fraudulent intent may be proven by circumstantial evidence.
Edelson v. Commissioner, 829 F.2d 828, 832 (9th Cir. 1987), affg.
T.C. Memo. 1986-223; Rowlee v. Commissioner, supra; Stephenson v.
Commissioner, 79 T.C. 995, 1006 (1982), affd. 748 F.2d 331 (6th
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