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7. Conclusion
Joseph methodically understated gross receipts and cost of
goods sold in order to conceal the amount of net profit that
Monterey earned; he did that 2 years in a row. According to his
own testimony, which, in many respects, was incredible, he had
kept what amounted to a second set of books, the computer sheets,
which purportedly are missing. Joseph had no explanation for why
he maintained two separate sets of books. He moved funds from
Monterey’s bank account to his personal account. That is the
clear evidence that convinces us that Joseph fraudulently
intended to understate his income with respect to Monterey for
1987 and 1988.
D. Portion of Underpayments Attributable to Fraud
Petitioners have failed to rebut the presumption that the
entire underpayments in tax for 1987 and 1988 are due to fraud.
See sec. 6653(b)(2). We find accordingly.
E. Additions to Tax For Fraud
We sustain respondent’s additions to tax for fraud against
Joseph under section 6653(b)(1)(A) and (B) for 1987 and under
section 6653(b)(1) for 1988.
III. Addition to Tax for Negligence
Having found that the entire underpayments for 1987 and 1988
are attributable to fraud, and that Joseph is subject to
additions to tax on account thereof, we need not address the
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