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file income tax returns; (3) dealing in cash; (4) transferring or
otherwise concealing funds; (5) petitioner's lack of cooperation
with tax authorities. We use these badges, which are
illustrative only, as tools in considering the totality of the
facts and circumstances, which in this case includes Mark's
admitted illegal drug abuse, to determine the existence of
fraudulent intent. King's Court Mobile Home Park, Inc. v.
Commissioner, 98 T.C. 511, 516 (1992).
Evidence of emotional or substance abuse problems can rebut
evidence of fraudulent intent, either by showing that it
prevented the taxpayer from forming the requisite intent, Hollman
v. Commissioner, 38 T.C. 251, 259-260 (1962) ("considerable
psychiatric evidence" of a severe psychosis overcame other
evidence showing taxpayer's "astuteness and awareness of matters"
and participation in "intricate financial operations during the
tax years"), supplemented by T.C. Memo. 1962-236, or as part of a
larger pattern of facts and circumstances that does not present
clear and convincing evidence to the court. Gutierrez v.
Commissioner, T.C. Memo. 1995-252 (combination of alcoholism, lax
record-keeping, and cooperation with IRS indicated lack of
fraudulent intent), affd. in part and revd. and remanded on other
issues without published opinion 105 F.3d 651 (5th Cir. 1996).
In other cases, this Court has used the presence of
compelling evidence of a taxpayer's acts to mislead and conceal
to find fraud, despite evidence of mental illness, Yarbrough
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