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preparer is also an indication of fraud, Korecky v. Commissioner,
781 F.2d 1566, 1568 (11th Cir. 1986), affg. per curiam T.C. Memo.
1985-63, as is a conviction under section 7206(1), Wright v.
Commissioner, 84 T.C. 636 (1985).
Although 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, a pattern of
consistent underreporting of income, especially when accompanied
by other circumstances showing an intent to conceal, justifies
the inference of fraud, see Holland v. United States, 348 U.S.
121, 139 (1954); Parks v. Commissioner, 94 T.C. 654, 664 (1990);
Otsuki v. Commissioner, 53 T.C. at 108. In the instant case,
considering the record as a whole, we conclude that there are
sufficient badges of fraud to carry respondent's burden of proof.
The record reveals a pattern of consistent underreporting of
income by petitioner during all of the years in issue. Moreover,
it is uncontroverted that petitioner failed to maintain adequate
records of his unreported income and expenses and that petitioner
conducted much of his business in cash. Additionally, petitioner
failed to be forthcoming with his return preparer, Mr. Dillon,
disclosing neither his cash purchases nor his band expenses,
including band advertising. Furthermore, while a conviction
under section 7206(1) does not establish fraud, it is one factor
to be considered. Wright v. Commissioner, supra at 643-644.
We conclude that the record in the instant case contains
clear and convincing evidence that there was an underpayment for
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