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defraud. We have carefully considered the evidence, including
petitioner’s testimony, which we found credible. We hold that
the under reporting here does not, when considered in light of
the record in its totality, show or raise an inference that
petitioner intended to conceal or mislead.
We find the circumstances here to be somewhat unusual. The
combination of petitioner’s inexperience, immaturity, and
reliance on his father make his position plausible. It must be
noted that the three Federal income tax returns under
consideration represent some of the first ones that petitioner
filed, and he continued to live with his parents throughout most
of the period under consideration. In addition, this was
petitioner’s first self-employment business experience.
The Commissioner has relied upon taxpayers’ understatements
of income to circumstantially show fraudulent intent and has been
successful in numerous fraud penalty cases where such
understatements were coupled with other badges of fraud. In a
few cases, however, the Commissioner has failed to establish a
link between understatements and fraudulent intent. In Rao v.
Commissioner, T.C. Memo. 1996-500, the fraud penalty was not
sustained even though the taxpayer, a doctor, had substantial and
consistent understatements of gross income. In that case, the
taxpayer relied on his accountant, in the same manner as
petitioner has relied on his father. In another case, involving
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