- 46 -
We are satisfied that respondent has shown the existence of
underpayments for both years by clear and convincing evidence.
Accordingly, the first element of the fraud addition to tax is
established for both 1987 and 1988.
Fraudulent Intent for 1987 and 1988
Petitioner argues that he should be regarded as an
unsophisticated taxpayer, that he handled his tax matters in an
inattentive manner, and that because of large deductions he assumed
were available to him he innocently estimated he owed no Federal
income taxes for 1987 and 1988. Petitioner further argues that he
filed his Federal income tax returns without much thought and that
any underreporting of his correct income that was reflected on his
tax returns was inadvertent.
For 1987 and 1988, petitioner substantially underreported his
correct income, and for 1987, petitioner overstated his allowable
deductions.
Petitioner failed to maintain adequate books and records for his
law firm, and he failed to provide that adequate books and records be
maintained for 2618 Inc, for the Club, and for Payne & Potter.
Petitioner's inadequate records and his inconsistent and ever-
changing explanations complicated greatly respondent’s audit and
resolution of the issues in these cases. Petitioner failed to
cooperate with respondent during respondent’s audit and during parts
of these proceedings.
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