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is never presumed and must be established by independent evidence
of fraudulent intent. Edelson v. Commissioner, supra. Fraud may
be shown by circumstantial evidence because direct evidence of
the taxpayer's fraudulent intent is seldom available. Gajewski
v. Commissioner, 67 T.C. 181, 199 (1976), affd. without published
opinion 578 F.2d 1383 (8th Cir. 1978). The taxpayer's entire
course of conduct may establish the requisite fraudulent intent.
Stone v. Commissioner, 56 T.C. 213, 223-224 (1971); Otsuki v.
Commissioner, 53 T.C. 96, 105-106 (1969).
Courts have developed several indicia of fraud, or “badges
of fraud”, which include: (1) Understatement of income,
(2) inadequate books and records, (3) failure to file tax
returns, (4) implausible or inconsistent explanations of
behavior, (5) concealment of assets, (6) failure to cooperate
with tax authorities, (7) filing false Forms W-4, (8) failure to
make estimated tax payments, (9) dealing in cash, (10) engaging
in illegal activity, and (11) attempting to conceal illegal
activity. Bradford v. Commissioner, 796 F.2d 303, 307 (9th Cir.
1986), affg. T.C. Memo. 1984-601; Recklitis v. Commissioner, 91
T.C. 874, 910 (1988). This list is nonexclusive. Miller v.
Commissioner, 94 T.C. 316, 334 (1990).
The strongest evidence of fraud in this case is the method
in which petitioner received income from the restaurants.
Petitioner instructed Pat Bartley, the manager of the Salinas
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