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Commissioner, supra at 847; Chase v. Commissioner, T.C. Memo.
2004-142.
Courts have found that badges or indicia of fraud provide
probative evidence. Badges of fraud include: (1) Consistent and
substantial understatement of income; (2) failure to cooperate
with authorities; (3) implausible or inconsistent explanations of
behavior; (4) failure to maintain adequate books and records; (5)
concealment of assets; (6) concealing income and information from
a return preparer; and (7) extensive dealings in cash. E.g.,
Spies v. United States, 317 U.S. 492, 499 (1943); Estate of
Mazzoni v. Commissioner, 451 F.2d 197, 202 (3d Cir. 1971), affg.
T.C. Memo. 1970-37; DiLeo v. Commissioner, supra at 875; Chase v.
Commissioner, supra; Bacon v. Commissioner, T.C. Memo. 2000-257,
affd. without published opinion 275 F.3d 33 (3d Cir. 2001).
Petitioner understated substantial amounts of his income in
each of the years in issue. Petitioner falsely stated to
respondent’s agents that he was unaware that checks issued to the
corporation had been deposited to his and Ms. McNamara’s personal
bank account.
Petitioner failed to maintain adequate corporate books and
falsified corporate records. Numerous customer checks were not
recorded on the corporation’s books and records. Petitioner
caused the corporation to issue checks to pay fictitious expenses
and recorded these fictitious expenses in the corporation’s
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