David Rendel and Rachel Rendel - Page 14

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                              Fraudulent intent consists of an intentional wrongdoing for                                                                                  
                    the purpose of avoiding the payment of taxes known to be owed.                                                                                         
                    Powell v. Granquist, 252 F.2d 56, 60 (9th Cir. 1958); DiLeo v.                                                                                         
                    Commissioner, 96 T.C. 858, 874 (1991), affd. 959 F.2d 16 (2d Cir.                                                                                      
                    1992).  Fraud may be inferred from certain "badges of fraud,"                                                                                          
                    such as understatements of income, inadequate records, the                                                                                             
                    failure to file tax returns, the concealment of assets,                                                                                                
                    implausible or inconsistent behavior, and the failure to                                                                                               
                    cooperate with tax authorities.  Bradford v. Commissioner, 796                                                                                         
                    F.2d 303, 307 (9th Cir. 1986), affg. T.C. Memo. 1984-601.                                                                                              
                              Because fraud can rarely be proved by direct evidence, fraud                                                                                 
                    is often established by circumstantial evidence.  Spies v. United                                                                                      
                    States, 317 U.S. 492, 499 (1943); Bradford v. Commissioner, 796                                                                                        
                    F.2d at 307; Akland v. Commissioner, 767 F.2d 618, 621 (9th Cir.                                                                                       
                    1985), affg. T.C. Memo. 1983-249.  Consistent and substantial                                                                                          
                    understatements of income may constitute evidence of fraud.                                                                                            
                    Marcus v. Commissioner, 70 T.C. 562, 577 (1978), affd. without                                                                                         
                    published opinion 621 F.2d 439 (5th Cir. 1980); Merritt v.                                                                                             
                    Commissioner, 301 F.2d 484, 487 (5th Cir. 1962), affg. T.C. Memo.                                                                                      
                    1959-172.                                                                                                                                              
                              Fraud determinations against taxpayers who have participated                                                                                 
                    in sham offshore trust programs similar to that in which                                                                                               
                    petitioners participated generally have been sustained.  See                                                                                           
                    Akland v. Commissioner, supra; Professional Serv. v.                                                                                                   
                    Commissioner, 79 T.C. 888, 930-931 (1982); Dahlstrom v.                                                                                                




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