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g. Failure To Cooperate With Respondent's Agent
Failure to cooperate in the examination and investigation of
tax liabilities is an indicium of fraud. Gajewski v.
Commissioner, 67 T.C. at 200. This record is replete with
evidence that petitioner did not cooperate with Ms. Davis during
her civil examination. He withheld records and documents. He
misled her. He did not intend to cooperate. We think he only
did what he thought was necessary to keep respondent's agent from
discovering his fraudulent scheme to hide his unreported income.
h. Conclusion as to Fraud
Accordingly, after considering all the facts and
circumstances present in this record, we find and hold that
petitioner is liable for the additions to tax for fraud with
respect to the amounts of the underpayments for 1987 and 1988.
Issue 4. Additions to Tax for Substantial Understatements
Section 6661(a), as applicable to 1987 and 1988, provides
for an addition to tax if there is a substantial understatement
of income tax for any taxable year. The addition to tax is in
the amount of 25 percent of the underpayment attributable to the
substantial understatement. Respondent determined that
petitioners substantially understated their income tax for 1987
and 1988, resulting in section 6661(a) additions to tax in the
amounts of $16,871 and $12,355, respectively.
Section 6661(b)(1) provides that an understatement is
substantial if (1) it exceeds 10 percent of the tax required to
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