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convincing evidence that the Gilchrists underpaid taxes relating
to 1986, 1987, and 1988. In each of these years, the Gilchrists
failed to report income diverted from Door Control and taxable to
them as dividends. During these years, the Gilchrists also
failed to report over $30,000 of expenditures Door Control made
for their personal expenses. Consequently, respondent has
established that the Gilchrists underpaid their taxes relating to
1986, 1987, and 1988.
II. Fraudulent Intent
To establish that petitioners are liable for the additions
to tax for fraud, respondent must prove by clear and convincing
evidence that petitioners intended to evade taxes. This burden
is met where respondent proves conduct intended to conceal,
mislead, or otherwise prevent the collection of taxes. Patton v.
Commissioner, 799 F.2d 166, 171 (5th Cir. 1986), affg. T.C. Memo.
1985-148. Fraudulent intent is not to be imputed or presumed but
rather must be established by some independent evidence. Beaver
v. Commissioner, 55 T.C. 85, 92 (1970); Otsuki v. Commissioner,
53 T.C. 96, 106 (1969).
Because direct proof of the taxpayer's intent is rarely
available, fraudulent intent may be established by circumstantial
evidence and reasonable inferences drawn from the facts. Spies
v. United States, 317 U.S. 492, 498 (1943); Stephenson v.
Commissioner, 79 T.C. 995, 1006 (1982), affd. 748 F.2d 331 (6th
Cir. 1984). Indicia of fraud include consistent underreporting
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