- 29 -
consideration.14
B. Fraudulent Intent
Next, respondent must prove that a portion of such
underpayment was due to fraud. Professional Servs. v.
Commissioner, 79 T.C. 888, 930 (1982).
Because direct proof of a taxpayer's intent is rarely
available, fraud may be proven by circumstantial evidence and
reasonable inferences may be drawn from the relevant facts.
Spies v. United States, 317 U.S. 492, 499 (1943); Stephenson v.
Commissioner, 79 T.C. 995, 1006 (1982), affd. 748 F.2d 331 (6th
Cir. 1984). An intent to conceal or mislead may be inferred from
a pattern of conduct, Spies v. United States, supra at 499, or
from a taxpayer's entire course of conduct, Stone v.
Commissioner, 56 T.C. 213, 223-224 (1971).
Over the years, courts have developed a nonexclusive list of
factors that demonstrate fraudulent intent. These badges of
fraud include: (1) Understating income, (2) maintaining
inadequate records, (3) failing to file tax returns, (4)
implausible or inconsistent explanations of behavior, (5)
concealment of income or assets, (6) failing to cooperate with
tax authorities, (7) engaging in illegal activities, (8) an
14 Since petitioners' alleged additional expenses are less than
the unreported income for each of the years in issue, we need not
concern ourselves with the line of cases that state that even in
criminal tax evasion cases where the Government bears the burden
of proof beyond a reasonable doubt, "evidence of unexplained
receipts shifts to the taxpayer the burden of coming forward with
evidence as to the amount of offsetting expenses, if any."
Siravo v. United States, 377 F.2d 469, 473 (1st Cir. 1967).
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