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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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