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Petitioners did not maintain adequate books and records
regarding the operation of the limousine service, their sales of
leather goods, or their gambling winnings. Because petitioners’
records for the years in issue are insufficient to show the gross
receipts from the limousine service, sales of leather goods, or
gambling winnings, the records are insufficient to accurately
compute petitioners’ tax liabilities for the years in issue.
Their failure to maintain adequate books and records is
indicative of fraud. See Truesdell v. Commissioner, supra at
1302.
3. Dealing in Cash
Petitioners often failed to keep records of cash income
from limousine runs and cash payments made to limousine drivers.
Dealings in cash may indicate fraud and heighten the negative
effect of inadequate record keeping. Friedman v. Commissioner,
421 F.2d 658 (7th Cir. 1970), affg. per curiam a Memorandum
Opinion of this Court; Nicholas v. Commissioner, 70 T.C. at 1066.
4. Providing Incomplete or Misleading Information to
Tax Preparer
Petitioners did not inform their return preparer of their
cash items, their income from the sale of leather goods, or their
gambling winnings. These facts also evidence fraud. See Estate
of Mazzoni v. Commissioner, 451 F.2d 197, 202 (3d Cir. 1971),
affg. T.C. Memo. 1970-37.
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