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at issue: (1) Understatement of income; (2) failure to keep
adequate books and records; (3) failure to file tax returns; (4)
acts designed to conceal income and/or assets; (5) false,
misleading, inconsistent, or implausible explanations of
behavior; (6) failure to cooperate with respondent’s agents; (7)
engaging in illegal activities; (8) awareness of tax laws; (9)
attempts to conceal illegal activities; (10) high education level
and sophistication; and (11) a pattern of inaction and delay
during the pretrial and trial proceedings.
We agree that petitioner’s deemed admissions contain several
badges of fraud. Petitioner knew of the requirement to file tax
returns. Nevertheless, petitioner consistently failed to report
substantial amounts of income over several years, behavior which
strongly evidences fraudulent intent. See Farber v.
Commissioner, 43 T.C. 407, 419-420 (1965). Petitioner also knew
of the requirement to maintain adequate books or records of
account but failed to do so. This record-keeping omission,
combined with petitioner’s failure to file tax returns,
constitutes persuasive evidence of petitioner’s intent to conceal
income and evade taxes. Petzoldt v. Commissioner, supra at 701.
Other badges of fraud contained in petitioner’s deemed
admissions include petitioner’s involvement in illegal
activities, as evidenced by petitioner’s criminal convictions and
practice of opening bank accounts under false names, addresses,
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Last modified: May 25, 2011