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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 be proved, however, 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. Spies v. United States, 317 U.S. 492, 499
(1943); Stone v. Commissioner, 56 T.C. 213, 223-224 (1971);
Otsuki v. Commissioner, 53 T.C. 96, 105-106 (1969).
The following facts that indicate fraud in this case have
been established by clear and convincing evidence:
(1) Petitioner's misappropriation of funds from Zebrowski (see,
e.g., Solomon v. Commissioner, T.C. Memo. 1982-603, affd. 732
F.2d 1459 (6th Cir. 1984)); (2) petitioner's understatement of
his taxable income by failing to report the misappropriated funds
on his 1988 return (see Davis v. Commissioner, supra);
(3) petitioner's frequent dealings in cash (Bradford v.
Commissioner, 796 F.2d 303, 308 (9th Cir. 1986), affg. T.C. Memo.
1984-601; Petzoldt v. Commissioner, 92 T.C. 661, 702 (1989));
(4) petitioner's implausible denial of the receipt of the
misappropriated funds and failure to explain expenditures that
far exceeded his reported income (see, e.g., Bahoric v.
Commissioner, 363 F.2d 151, 153 (9th Cir. 1966), affg. T.C. Memo.
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