Dennis C. Gandy - Page 43

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          Commissioner, supra at 377-380.  Fraud will never be presumed.              
          It may be proved by circumstantial evidence, because direct proof           
          of the taxpayer’s intent is rarely available.  The taxpayer’s               
          entire course of conduct may establish the requisite fraudulent             
          intent.  Estate of Temple v. Commissioner, 67 T.C. 143, 159, 161            
          (1976).  Both petitioners pleaded guilty and were convicted of              
          filing a false return for 1987, and their pleas and convictions             
          may also be considered as evidence of intent.  Wright v.                    
          Commissioner, 84 T.C. 636, 643-644 (1985).  A pattern of                    
          consistent and substantial understatements of income is strong              
          evidence of fraud.  Webb v. Commissioner, 394 F.2d at 379; Marcus           
          v. Commissioner, 70 T.C. 562, 577 (1978), affd. without published           
          opinion 621 F.2d 439 (5th Cir. 1980).                                       
               The courts have developed a number of objective indicators             
          or “badges” of fraud that may establish fraudulent intent,                  
          including understatement of income, inadequate records,                     
          implausible or inconsistent explanations of behavior, concealment           
          of assets, and substantial dealings in cash.  See, e.g., Bradford           
          v. Commissioner, 796 F.2d 303, 307 (9th Cir. 1986), affg. T.C.              
          Memo. 1984-601.  In these cases, respondent contends that                   
          petitioners engaged in a 5-year pattern of understating                     
          substantial amounts of income, maintained inadequate books and              
          records, concealed assets by use of “secret” bank accounts, such            
          as the account in the name of Burnice Gandy and the personal                





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