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(v) Failure to file tax returns
Petitioner's failure to file tax returns in 1986 or 1987
serves as yet another indicator of fraud. Bradford v.
Commissioner, 796 F.2d at 307-308. Petitioner's admitted
understanding that he was obliged to file returns during those
years reinforces the strength of this badge of fraud.
(vi) Failure to cooperate with tax authorities
Failure to cooperate with tax authorities is a badge of
fraud. Zell v. Commissioner, 763 F.2d 1139, 1145-1146 (10th Cir.
1985) (taxpayer's open defiance of tax laws helped establish his
intent to commit tax fraud), affg. T.C. Memo. 1984-152; Powell v.
Granquist, 252 F.2d 56, 61 (9th Cir. 1958) (taxpayer's open
defiance of tax laws helped establish his intent to commit tax
fraud). By contrast, a taxpayer's active cooperation may be a
factor in finding no fraud. Jones v. Commissioner, 259 F.2d 300,
303 (5th Cir. 1958) (taxpayer's cooperation by making his books
readily available to authorities was one factor in finding no
fraud), revg. and remanding 25 T.C. 1100 (1956); Chin v.
Commissioner, T.C. Memo. 1994-54 (showing of cooperation by
trying to correct past mistakes was one indication that there was
no fraud). In this instance, petitioner deliberately failed to
cooperate with the Government during the course of his audit for
1986 and 1987, albeit at his counsel's advice.
Reliance on an attorney or another tax preparer may
constitute a defense against fraud if the taxpayer relied upon
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