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filing of a false corporate return and willfully underreporting
income relating to his 1988 and 1989 tax returns.
The evidence is clear and convincing that Metro’s
underpayment of tax was attributable to the fraudulent actions of
its officers, McGraw and Butler. See Davis v. Commissioner, T.C.
Memo. 1991-603 (holding that the Commissioner may prove intent to
evade tax by circumstantial evidence); see also, e.g.,
Niedringhaus v. Commissioner, 99 T.C. 202, 211 (1992) (evidence
of fraud may include substantial understatement of income,
inadequate books and records, failure to cooperate with tax
authorities, dealing in cash, implausible explanations of conduct
given at trial, and participation in or concealment of illegal
activities).
We reject petitioners’ contention that, in filing Metro’s
returns, petitioners relied in good faith on the advice of
Metro’s outside accountants. There is no evidence that Metro’s
outside accountants knew that Butler and McGraw conspired to omit
income and deduct fictitious subcontract expenses. Even if
Metro’s outside accountants, having knowledge of all the relevant
facts, had instructed petitioners to omit Metro’s income and
deduct fictitious subcontract expenses, such advice would have
been so clearly wrong that we could not find that petitioners
relied upon the advice in good faith. See LaVerne v.
Commissioner, 94 T.C. 637, 652-653 (1990), affd. without
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