- 16 -
398 F.2d 1002, 1004 (3d Cir. 1968); Webb v. Commissioner, 394
F.2d 366, 377 (5th Cir. 1968), affg. T.C. Memo. 1966-81.
The existence of fraud is a question of fact to be resolved
upon consideration of the entire record. Gajewski v.
Commissioner, 67 T.C. 181, 199 (1976), affd. without published
opinion 578 F.2d 1383 (8th Cir. 1978). Fraud will never be
presumed. Beaver v. Commissioner, 55 T.C. 85, 92 (1970). Fraud
may, however, be proved by circumstantial evidence because direct
proof of the taxpayer's intent is rarely available. The
taxpayer's entire course of conduct may establish the requisite
fraudulent intent. Stone v. Commissioner, 56 T.C. 213, 223-224
(1971); Otsuki v. Commissioner, 53 T.C. 96, 105-106 (1969).
Intent may be inferred from various kinds of circumstantial
evidence, or "badges of fraud", including an understatement of
income, false statements or documents, concealment of assets or
covering up sources of income, and implausible or inconsistent
explanations of behavior. Spies v. United States, 317 U.S. 492
(1943); Bradford v. Commissioner, 796 F.2d 303, 307 (9th Cir.
1986), affg. T.C. Memo. 1984-601. In this case, respondent's
strongest evidence is petitioner's falsification of documents to
corroborate its version of the events in the year in issue and
other conduct during the preparation of petitioner's 1988 tax
return.
Although a formal plan of liquidation was not required under
section 337, petitioner represented to the IRS that it had
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