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income for Federal income tax purposes. Although Mr. Zhadanov
testified that, as a Russian, he did not trust banks and was
unaccustomed to keeping his money in banks, we are convinced that
Mr. Zhadanov intended to conceal the cash by keeping it in his
safe. Mr. Zhadanov’s intent to conceal the cash is further
demonstrated by his concealment of the cash from his accountant.
See Duffey v. Commissioner, 91 T.C. 81 (1988); Langworthy v.
Commissioner, T.C. Memo. 1998-218 (taxpayer’s failure to be
forthcoming with his return preparer was evidence of fraud).
(4) Engaging in Illegal Activity. Vortex was engaged in the
illegal manufacture and sale of plastic vials used in the
distribution of crack cocaine during the years at issue. As we
have previously stated, it is reasonable for us to assume that,
when income is derived from illegal activity, a taxpayer’s
failure to report the income is intended to mislead and frustrate
a potential criminal prosecution and is an indication of a
taxpayer’s intent to evade his taxes. Reed v. Commissioner, T.C.
Memo. 1997-388, affd. per curiam without published opinion 155
F.3d 560 (4th Cir. 1998); Baker v. Commissioner, T.C. Memo. 1991-
340, affd. without published opinion 9 F.3d 1550 (9th Cir. 1993).
(5) Attempting To Conceal Illegal Activity. When Mr.
Zhadanov became aware that the plastic vials were being used in
the distribution of crack cocaine, he attempted to distance
Vortex from Belkin and Edelson. He entered into a sham lease of
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