Lawrence J. Polidori - Page 16

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          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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