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sufficient to establish fraud, the combination of a number of
factors constitutes persuasive evidence. Solomon v.
Commissioner, 732 F.2d 1459, 1461 (6th Cir. 1984), affg. per
curiam T.C. Memo. 1982-603. We note that some conduct and
evidence can be classified under more than one factor.
1. Mr. Welker's Sophistication and Experience
Mr. Welker was an office manager/loan officer for a finance
company. He had a high school education and no formal training
in tax return preparation or accounting. Mr. Welker, however,
knew to deduct Social Security and withholding taxes from the
amounts he paid himself from Miller-Senate. Additionally, he
informally asked Miller-Senate's accountant some questions about
tax return preparation.
2. Consistent and Substantial Understatements of
Income
The mere failure to report income is not sufficient to
establish fraud. Merritt v. Commissioner, 301 F.2d 484, 487 (5th
Cir. 1962), affg. T.C. Memo. 1959-172. Consistent and
substantial understatement of income, however, may be strong
evidence of fraud when coupled with other circumstances. Marcus
v. Commissioner, 70 T.C. 562, 577 (1978), affd. without published
opinion 621 F.2d 439 (5th Cir. 1980). A pattern of consistent
underreporting of income, when accompanied by other circumstances
indicating an intent to conceal income, may justify the inference
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