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to be treated as attributable to fraud, except with respect to
any portion of the underpayment which the taxpayer establishes by
a preponderance of the evidence is not attributable to fraud.
Sec. 6663(b).
Ahmed, individually and as president of K & M for the years
in issue, grossly understated his and K & M’s taxable income, and
he significantly underpaid the Federal income tax due, measured
both in dollars and in percentages.
For the years in issue, Ahmed underreported his and K & M’s
taxable income by a cumulative total of $1,903,314, and he
underpaid his and K & M’s Federal income tax by an estimated
cumulative total of $812,903, representing understatements of
taxable income and underpayments of Federal income tax for each
year of 55 percent to 96 percent.
Ahmed’s underreporting over a period of at least 4 years of
his and of K & M’s taxable income and the related underpayment of
Federal income taxes are persuasive evidence of Ahmed’s
fraudulent intent, particularly combined with the unreported cash
proceeds and the claimed business deductions relating to personal
expenses.
Further, Ahmed did not maintain adequate financial records
relating to his business activities, demonstrated by the failure
to properly account for certain intercompany transactions, to
record certain cash transactions, and to properly report personal
expenses paid out of corporate funds.
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