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expenditures that petitioners made during the subject years for,
among other things, a new Mercedes, a new Lincoln Town Car, and
a new Chevrolet Suburban, were inconsistent with the income and
losses reported on their joint Federal income tax returns.
Furthermore, both Lesely and Aljournia pleaded guilty to
one count of income tax evasion pursuant to section 7201 for
taxable year 1990. A taxpayer’s criminal conviction, pursuant
to section 7201, for tax evasion in the years immediately
subsequent to the year in issue is a badge of fraud. See Tipton
v. Commissioner, T.C. Memo. 1994-624.
d. Failure To Maintain Adequate Records
During the years in issue, petitioners made numerous
deposits into accounts and various transfers between and among
accounts. Petitioners failed, however, to maintain adequate
records as to income and expenses, including any records
reflecting the income earned by Lesely from illegal gambling or
numbers operations.
e. Failure To Furnish Their Tax Return Preparer With
Accurate Information
By failing to inform Jenkins of the income received from
Lesely’s participation in illegal numbers operations,
4(...continued)
money represented coins collected by her children, a bag of
buffalo nickels that she had received from her grandmother, and
coins from her store.
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