- 16 -
Cir. 1975). The issue of fraud presents a factual question which
must be decided on the basis of an examination of all evidence
contained in the record. Mensik v. Commissioner, 328 F.2d 147
(7th Cir. 1964), affg. 37 T.C. 703 (1962); Stone v. Commissioner,
56 T.C. 213, 224 (1971); Stratton v. Commissioner, 54 T.C. 255,
284, modified 54 T.C. 1351 (1970). Fraud is never presumed; it
must be established by independent evidence of fraudulent intent.
Beaver v. Commissioner, 55 T.C. 85 (1970). Fraud may be proved
by circumstantial evidence and inferences drawn from the record
because direct proof of the taxpayer's intent is rarely
available. Spies v. United States, 317 U.S. 492 (1943); Rowlee
v. Commissioner, 80 T.C. 1111 (1983); Stephenson v. Commissioner,
79 T.C. 995 (1982), affd. 748 F.2d 331 (6th Cir. 1984).
Fraudulent intent may be inferred from a pattern of conduct.
Spies v. United States, supra at 499. A pattern of consistent
underreporting of income, especially when accompanied by other
circumstances showing an intent to conceal, justifies the
inference of fraud. See Holland v. United States, 348 U.S. 121,
137 (1954); Otsuki v. Commissioner, 53 T.C. 96 (1969).
Understatement of Income Tax
In order for respondent to prove fraud with respect to the
taxable years at issue, she must establish by clear and
convincing evidence that an underpayment of tax exists with
respect to such taxable years. Parks v. Commissioner, supra;
Hebrank v. Commissioner, supra. In establishing the existence of
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