- 38 -
specific purpose of evading a tax believed to be owing, Webb v.
Commissioner, 394 F.2d 366, 377 (5th Cir. 1968), affg. T.C. Memo.
1966-81. Fraud may be proven by circumstantial evidence because
direct evidence of the taxpayer's intent is rarely available.
Stephenson v. Commissioner, 79 T.C. 995, 1005-1006 (1982), affd.
748 F.2d 331 (6th Cir. 1984).
Respondent argues that the following badges of fraud are
present in this case: A pattern of unreported income, failure
to keep books and records, concealment of income, and false
statements to revenue agents. We disagree that the evidence is
sufficient to clearly and convincingly show that petitioner
husband fraudulently underreported income in 1988 and 1989. We
recognize that he could not accurately reconstruct income for
those years from his books and records, but we are not persuaded
that he underreported his income due to fraud, rather than
carelessness or negligence.
Respondent alleges that petitioner husband did not have
a bank account in his name. Respondent's allegation is not
entirely correct; petitioner husband had an account in his name
at First State Bank in 1987. Also, Respondent points out that
petitioner husband deposited his income in Canta's and petitioner
wife's bank accounts, that in 1988 he cashed two commission
checks totaling $14,622, and that he gave his return preparer
only the 1988 commission income documented by Forms 1099.
However, we do not believe petitioner husband's use of those bank
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