- 17 -
tax authorities, (7) engaging in illegal activities, (8) an
intent to mislead which may be inferred from a pattern of
conduct, (9) lack of credibility of the taxpayer's testimony,
(10) filing false documents, and (11) dealing in cash. See Douge
v. Commissioner, 899 F.2d 164, 168 (2d Cir. 1990); Bradford v.
Commissioner, 796 F.2d 303, 307-308 (9th Cir. 1986), affg. T.C.
Memo. 1984-601; Recklitis v. Commissioner, 91 T.C. 874, 910
(1988). Although no single factor is necessarily sufficient to
establish fraud, the combination of a number of factors
constitutes persuasive evidence. Solomon v. Commissioner, 732
F.2d 1459, 1461 (6th Cir. 1984), affg. per curiam T.C. Memo.
1982-603. We note that some conduct and evidence can be
classified under more than one factor and not all badges are
applicable in every case. The sophistication, education, and
intelligence of the taxpayer are relevant to this determination.
Niedringhaus v. Commissioner, 99 T.C. 202, 211 (1992).
a. Petitioner's Sophistication and Experience
Dr. Rao is a medical doctor and also manages the medical
center. He has no experience in accounting or tax return
preparation. Based upon these facts, we shall not hold Dr. Rao
to either a higher or lower standard while evaluating his
actions.
b. Consistent and Substantial Understatements of Income
The mere failure to report income is not sufficient to
establish fraud. Merritt v. Commissioner, 301 F.2d 484, 487 (5th
Page: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NextLast modified: May 25, 2011