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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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