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The Court assumes that petitioner misspoke in her testimony
about the exclusion of the year 1991 from her computation of CNC
distributions. Petitioner, however, did not explain why she
excluded from her computation distributions she and her late
husband received from CNC in 1989 and 1990. Also, if she were
following her husband's instruction before he died in May of 1992
that they needed only approximately $18,000 more to "start
retaining a profit from CNC", almost all distributions in 1992
($58,602) would have been "profit".
Even assuming that petitioner believed that she would not
realize income from CNC until she had recovered distributions in
excess of her combined investment, she must have known that for
1994, certainly, she had realized more income than she reported
on her tax return. She failed to disclose to the certified
public accountant, who was preparing her tax return for the year,
and would have assisted her, any explanation of the CNC
investments.
For the year 1994 respondent has shown by clear and
convincing evidence a pattern of underreporting of income
accompanied by an intent to mislead or conceal and an implausible
explanation of behavior. We find that the underpayment of tax on
petitioner's 1994 return was due to fraud. See Holland v. United
States, 348 U.S. 121 (1954); Parks v. Commissioner, 94 T.C. at
664 (1990); Bradford v. Commissioner, 796 F.2d 303, 307 (9th Cir.
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