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Traditionally, certain “badges” of fraud have been
considered in deciding whether the penalty applies:
(1) Understatement of income, (2) lack of adequate records, (3)
failure to cooperate with tax authorities, (4) concealment of
assets, (5) engagement in illegal activities, (6) dealing in
large amounts of cash, (7) making of implausible and inconsistent
statements, and (8) the willingness to defraud another in a
business transaction. Bradford v. Commissioner, supra at 307-
308; Recklitis v. Commissioner, 91 T.C. 874, 910 (1988).
Although no single factor is necessarily sufficient to establish
fraud, the existence of several indicia may provide persuasive
circumstantial evidence of fraud. Miller v. Commissioner, 94
T.C. 316, 334 (1990).
Respondent contends that, with respect to the original 1990
income tax return, petitioner fraudulently omitted taxi leasing
and Medicaid income. At the time his original 1990 return was
filed, petitioner was receiving income from his taxi-leasing
business and from the county government in connection with
Medicaid transportation services. Petitioner, in an attempt to
conceal that income, did not report that he was involved in a
taxi business or that he was being paid by the county in
connection with Medicaid services.
Respondent, by means of a bank deposit analysis for 1990,
has shown that petitioner’s unexplained deposits far exceeded the
amount of gross income reported. In addition, after petitioner’s
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