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that, for the years 1986 through 1991, petitioner omitted a
cumulative total of $668,783 in embezzlement income. We sustain
respondent’s determination of petitioner’s income for each year.
With regard to the fraud additions to tax and fraud-related
penalties, respondent has the burden of proving fraud by clear
and convincing evidence. See sec. 7454(a); Rule 142(b); Bagby v.
Commissioner, 102 T.C. 596, 607 (1994). Indicia of petitioner's
fraud in this case include understatements of income, illegal
activity, inadequate books and records, dealing in cash, and
implausible or inconsistent explanations. See, e.g., 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).
The evidence clearly and convincingly establishes that
petitioner realized significant income from embezzlement and that
he intentionally failed to report such income on his and his
wife's joint Federal income tax returns. For each year in issue,
petitioner is liable for the fraud additions to tax and fraud-
related penalties as determined by respondent.
To reflect the foregoing,
Decision will be entered for
respondent.
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