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the record indicates that the profit being earned by petitioner
was being passed through and reported as income by anyone.
Mr. Golden admits that each item of expense charged to the
drivers by petitioner was marked up, and he attempts to explain
that this markup was not shown as income on its returns because
it covered “administrative costs associated with this service.”
Petitioner introduced no evidence of any administrative costs,
and given the fact that the only two people involved in
petitioner’s business were Mr. and Mrs. Golden, we think it is
unlikely that any administrative costs were incurred by
petitioner regarding these marked-up expenses.
The fact that petitioner may have deposited all of its
income and the fact that petitioner cooperated with respondent
does not militate against a finding of fraud.
We agree with respondent that the underpayment in each of
the years at issue is attributable to the fraud of Mr. Golden and
is therefore attributed to petitioner. The record shows that
petitioner engaged in a 3-year pattern of understating income and
overstating expenses. Petitioner failed to keep adequate records
and concealed the income from petitioner’s tax return preparer by
providing him only with unsubstantiated income and expense
amounts. Mr. Golden possessed sufficient education and knowledge
of his duty to report petitioner’s income. He provided
implausible explanations, such as that petitioner was simply a
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