Chong-Kak and Sang-Ok Lee - Page 25

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               b.  Fraudulent Intent                                                  
               For Hamalee's 1985 and 1986 taxable years, and the Lees'               
          1987 and 1988 taxable years, we turn to the second prong of the             
          two-prong test.  The existence of fraud is a question of fact.              
          Gajewski v. Commissioner, 67 T.C. 181, 199 (1976), affd. without            
          published opinion 578 F.2d 1383 (8th Cir. 1978).  Fraud is never            
          presumed or imputed; it must be established by independent                  
          evidence that establishes a fraudulent intent on the taxpayer's             
          part.  Otsuki v. Commissioner, 53 T.C. 96, 106 (1969).  Because             
          direct proof of a taxpayer's intent is rarely available, fraud              
          may be proven by circumstantial evidence and reasonable                     
          inferences may be drawn from the relevant facts.  Spies v. United           
          States, 317 U.S. 492, 499 (1943); Stephenson v. Commissioner,               
          79 T.C. 995, 1006 (1982), affd. 748 F.2d 331 (6th Cir. 1984).               
          An intent to conceal or mislead may be inferred from a pattern of           
          conduct, Spies v. United States, supra at 499, or from a                    
          taxpayer's entire course of conduct, Stone v. Commissioner,                 
          56 T.C. 213, 223-224 (1971).  A pattern showing a consistent                
          underreporting of income, when accompanied by other facts                   
          evidencing an intent to conceal, also justifies an inference of             
          fraud.  Holland v. United States, 348 U.S. 121, 137 (1954);                 
          Parks v. Commissioner, supra; Otsuki v. Commissioner, supra at              








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