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b. Circumstantial Evidence of Fraud
Fraud may also be proven by circumstantial evidence.
Stephenson v. Commissioner, 79 T.C. 995, 1005-1006 (1982), affd.
748 F.2d 331 (6th Cir. 1984). The courts have developed a number
of objective indicators or "badges" of fraud. Recklitis v.
Commissioner, 91 T.C. 874, 910 (1988). The badges of fraud in
this case corroborate petitioner's admitted intent to evade tax
for 1985, 1986, and 1987. The badges of fraud present here are:
(a) Filing false Forms W-4; (b) failure to file income tax
returns; (c) substantially understating income for several years;
and (d) making implausible or inconsistent explanations of
behavior. Bradford v. Commissioner, 796 F.2d 303, 307-308 (9th
Cir. 1986), affg. T.C. Memo. 1984-601; Ruark v. Commissioner,
449 F.2d 311, 312-313 (9th Cir. 1971), affg. T.C. Memo. 1969-48;
Meier v. Commissioner, 91 T.C. 273, 297-298 (1988).
c. Filing False Forms W-4
Filing false Forms W-4 may be evidence of fraud. Bradford
v. Commissioner, supra at 308; Recklitis v. Commissioner, supra
at 910-911; Rowlee v. Commissioner, supra at 1125; Stephenson v.
Commissioner, supra at 1007.
Respondent penalized petitioner for filing false Forms W-4
for his 1982 tax year. Despite this, petitioner later filed
false Forms W-4: (a) In 1984, claiming 99 withholding
allowances; (b) in 1985, claiming 14 withholding allowances, and
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