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Indicia of fraud include: (1) Understatements of income;
(2) inadequate books and records; (3) lack of cooperation with tax
authorities; and (4) implausible or inconsistent explanations of
behavior. See Bradford v. Commissioner, 796 F.2d 303, 307-308 (9th
Cir. 1986), affg. T.C. Memo. 1984-601; Clayton v. Commissioner, 102
T.C. 632, 647 (1994); Petzoldt v. Commissioner, 92 T.C. 661, 699-
700 (1989); Recklitis v. Commissioner, 91 T.C. 874, 910 (1988).
With regard to the fraud alleged by respondent for 1989 and
1990, the evidence establishes that petitioner failed to maintain
adequate books and records with regard to income and expenses of
the Stores, that petitioner received significant taxable income not
reported on petitioners’ joint Federal income tax returns, and that
significant understatements of tax were made on petitioners’
Federal income tax returns.
We conclude that for 1989 and 1990 respondent has established
by clear and convincing evidence that petitioner fraudulently
intended to evade his correct Federal income tax liabilities.
For 1989 and 1990, we conclude that the increases to
petitioner's taxable income that we have sustained herein and that
relate to unexplained bank deposits are attributable to fraud. For
purposes of the fraud penalties, none of the other adjustments that
we sustain herein are attributable to fraud.
With regard to the section 6662(a) 20-percent accuracy-related
penalty that respondent determined for 1991, such penalty applies
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