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concessions by petitioners, there can be no doubt that there was
an underpayment of tax in each petitioner’s 1989 tax year. Thus,
we must decide for each petitioner whether any portion of such
underpayment was due to fraud. Id.
Fraudulent intent is seldom proven by direct evidence;
hence, the courts have relied on certain indirect evidence in
determining whether or not fraudulent intent existed. These
"badges of fraud" include: (1) Understating income; (2) keeping
inadequate records; (3) failing to file tax returns; (4)
providing implausible or inconsistent explanations of behavior;
(5) concealing assets; and (6) failing to cooperate with tax
authorities. Bradford v. Commissioner, 796 F.2d at 307.
Respondent contends that in these consolidated cases all of
the above-referenced badges of fraud exist, except that
petitioners did not fail to file returns. Petitioners contend
that respondent has not shown fraud by clear and convincing
evidence and that Maynard “believed that he was entitled to a
large net operating loss carryforward which would alleviate any
income tax liability and that he would not be able to utilize the
balance of the loss carryforward within the statutory time.” We
find petitioners’ explanation to be disingenuous considering that
they are tax professionals. We find that respondent has shown
that each petitioner’s underpayment of tax for 1989 was due to
fraud within the meaning of section 6663. We also find that
petitioners have not shown that any part of the underpayments was
not due to fraud.
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