- 19 -
alimony to his former wife and payments to Ms. Stanbery to which
he was not entitled. The underreported income and improper
deductions would result in an underpayment of petitioner's taxes
for each of the years in issue. Therefore, we find that
respondent has satisfied the burden of proof regarding the first
element.
The second element requires respondent to prove fraudulent
intent on the part of petitioner. Fraud will never be presumed.
Toussaint v. Commissioner, 743 F.2d 309, 312 (5th Cir. 1984),
affg. T.C. Memo. 1984-25; Beaver v. Commissioner, 55 T.C. 85, 92
(1970). Fraud, however, may be proved by circumstantial
evidence, because direct proof of a taxpayer's intent is rarely
available. The existence of fraud is a question of fact to be
determined on the basis of the entire record. Gajewski v.
Commissioner, 67 T.C. 181, 199 (1976), affd. without published
opinion 578 F.2d 1383 (8th Cir. 1978).
Courts have developed various factors or "badges" that tend
to establish fraud. Recklitis v. Commissioner, 91 T.C. 874, 910
(1988). Although the list is nonexclusive, some of the factors
are: (1) A pattern of understatement of income; (2) inadequate
records; (3) concealment of assets; (4) income from illegal
activities; (5) attempting to conceal illegal activities; (6)
implausible or inconsistent explanations of behavior; (7) dealing
in cash; (8) failure to cooperate with the Internal Revenue
Service; and (9) failure to file tax returns. Bradford v.
Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 NextLast modified: May 25, 2011