- 16 - portion of an underpayment of tax by a taxpayer which is specifically attributable to fraud. The burden is on respondent to establish fraud by clear and convincing evidence. Sec. 7454(a); Rule 142(b). Whether a portion of the tax is due to fraud is a question of fact to be determined from consideration of the entire record before the Court. Gajewski v. Commissioner, 67 T.C. 181, 199 (1976), affd. without published opinion 578 F.2d 1383 (8th Cir. 1978). Seldom is the Commissioner able to produce direct evidence of a taxpayer's fraud, since fraud by its very nature is a question of a taxpayer's intent. However, the Commissioner may prove fraudulent intent through circumstantial evidence. A taxpayer's entire course of conduct may be considered in determining whether fraudulent intent exists. Rowlee v. Commissioner, 80 T.C. 1111, 1123 (1983). The often-cited case of Bradford v. Commissioner, 796 F.2d 303, 307 (9th Cir. 1986), affg. T.C. Memo. 1984-601, lists as some of the "badges of fraud": (1) Understatement of income; (2) inadequate records; (3) failure to file tax returns; (4) implausible or inconsistent explanations of behavior; (5) concealing assets; and (6) failure to cooperate with tax authorities. Although the factors listed in the Bradford case are always considered, the record as a whole must be reviewed by the Court in determining whether the Commissioner has shown fraud by clear and convincing evidence. The only item listed in thePage: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Next
Last modified: May 25, 2011