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Clayton v. Commissioner, supra at 647. Direct evidence of the
requisite fraudulent intent is seldom available, but fraud may be
proved by examining circumstantial evidence indicative of the
taxpayer's motives. Recklitis v. Commissioner, 91 T.C. 874, 910
(1988). Over the years, courts have developed various factors,
or "badges", which tend to establish the existence of fraud. See
Clayton v. Commissioner, supra at 647.
Respondent relies primarily on the allegations of Mr.
Rabassa, who claims that Mrs. Daniel asked him to fabricate
deductions on her 1992 return. At trial, we had the opportunity
to observe Mr. Rabassa's demeanor and find his testimony to be
completely discreditable. Mr. Rabassa's motivation for making
such false accusations apparently stems from his inability to
adjust to his lower entry level position with the IRS after
occupying a high level management position in the banking
industry.
Moreover, we are unpersuaded by respondent's attempt to
bootstrap the disputed accusations of Mrs. Daniel's disgruntled,
subordinate worker into a broad assertion of fraud against an
employee who is acknowledged to have a reputation for honesty and
fairness, as testified to by her co-worker Martha Brookes. We
find that Mrs. Daniel's reliance upon Mr. Rabassa's advice was
certainly an error in her judgment, but does not support a
finding of fraudulent intent to evade tax believed to be due and
owing.
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