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respondent has met this burden. For 1990, petitioner conceded at
trial that he understated his income by $950. For 1992,
petitioner conceded that he improperly deducted reimbursed
medical expenses of $18,129. In addition, for each of the years
at issue, Taxman received $3,000 in cash receipts, and petitioner
took possession of the cash. The parties stipulated that the
$3,000 of cash taken by petitioner each year was not deposited
into Taxman’s bank account. Petitioner admits that he controlled
all of the cash and that he used some of it to pay personal
expenses. He did not keep track of how the cash was spent, and
he did not report the cash on his personal income tax returns.
Petitioner also admits that he used Taxman funds to pay for
furniture. Although petitioner asserts that some of the amounts
Taxman spent on his personal expenses were intended to be loans
from Taxman, respondent has shown that petitioner did not keep
credible records of some of these purported loans. Respondent
has also shown that petitioner received income from the sale of
his crop hail insurance business in 1990 that he did not report
on his return. We therefore conclude that respondent has
presented clear and convincing evidence that petitioner underpaid
his tax for 1990, 1991, 1992, and 1993.
B. Fraudulent Intent
Because direct evidence of fraud is rarely available, fraud
may be proved by circumstantial evidence and reasonable
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