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percent,5 155 percent, 131 percent, 161 percent, and 88 percent,
respectively.6 We conclude from the foregoing understatements of
income that petitioner engaged in a pattern of consistently
understating his gross receipts and overstating his business
expenses for the years in issue and that petitioner’s consistent
pattern of substantially understating income is a strong
indicator of fraud.
Petitioner failed to maintain adequate records, although he
indicated that he maintained his own records for both his
business and personal accounts. In their amended Federal income
tax returns, petitioners admitted that petitioner kept inadequate
records which resulted in understatements of income.7 Cf.
Badarraco v. Commissioner, 464 U.S. 386 (1984). Petitioner
claimed that the understatements during the years in issue were
due to: Inaccurate calculations of income, some of which were
from a trust account, double counting and miscalculating
deductions, and failure to properly account for certain stock
transfers. We conclude that the admissions on petitioners’
5Rounding to the nearest percentage point.
6These percentages are calculated by taking the excess of
the income reported on the final amended return over the income
reported on the original return, and dividing that amount by the
amount reported on the original return. See, e.g., Williams v.
Commissioner, T.C. Memo. 1992-153, affd. 999 F.2d 760 (4th Cir.
1993).
7The admissions were reported on petitioner’s amended
Federal income tax returns (Form 1040X) in the section entitled
“Part II Explanation of Changes to Income, Deductions, and
Credits”.
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