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We disagree that respondent has clearly and convincingly
proven that petitioner committed fraud. We think a more likely
explanation is that petitioner’s understatements of income were
due to negligence.
Petitioner had large understatements of income in 1988 and
1989 resulting from his sale of OPCS stock. While that is a
factor to be considered, a substantial understatement of income
standing alone does not prove fraud. See Vannaman v.
Commissioner, 54 T.C. 1011, 1018 (1970).
Petitioner did not keep records showing the number of his
shares of, or his basis in, OPCS stock in 1988 and 1989.
However, we do not believe that he did so with the intent to
underpay tax. Instead, we think he was careless. Carelessness
in the preparation and maintenance of books and records is not
fraud. See Mitchell v. Commissioner, supra.
Respondent argues that petitioner intentionally misled Delk.
We disagree. Petitioner admits that he hurriedly and negligently
prepared the 1988 tax organizer. However, he testified that he
told Delk about the errors on the organizers and that Delk had
the correct information available to him. Petitioner credibly
testified that he did not expect that the information on the 1988
and 1989 organizers would appear on petitioners’ returns as given
to Delk. Although petitioner did not give correct information to
Delk about the bases in the OPCS stock, we are not convinced that
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