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From the record in this case, we hold that petitioner’s 1987
return was fraudulent. He pled guilty to securities, mail, and
wire fraud in connection with his acquisition and sale of insider
information. He failed to report any of the income he received
from the sales in either 1987 or 1988. Reporting the illegal
income would have increased the risk that petitioner’s illegal
activities would be detected. Reluctance to report illegal
income because of the chances that the illegal source of the
income will be discovered does not preclude a tax evasion motive.
Recklitis v. Commissioner, supra at 909. Moreover, participation
in illegal activities is a badge of fraud. Bradford v.
Commissioner, supra. In addition, petitioner attempted to
conceal his illegal activities and income by dealing in cash and
using a bank account under fictitious names. He did not maintain
any records of the illegal income or how he used the money
received from selling insider information.
Petitioner argues that he did not have fraudulent intent
because he did not consider whether or not to report the illegal
income. Petitioner’s argument is unpersuasive. He is a well-
educated and knowledgeable taxpayer. In college, he took a
number of business courses, including a class on Federal income
tax accounting. Petitioner does not deny that he knew that
illegal income was taxable and was aware of his reporting
obligations. In addition, petitioner understood that he received
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