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Over the years, courts have developed various factors, or
"badges", which tend to establish fraud. Recklitis v.
Commissioner, 91 T.C. 874, 910 (1988). These include: (1) A
pattern of understatement of income; (2) inadequate books and
records; (3) failure to file tax returns; (4) concealment of
assets; (5) failure to cooperate with tax authorities; (6) income
from illegal activities; (7) implausible or inconsistent
explanations of behavior; (8) an intent to mislead which may be
inferred from a pattern of conduct; (9) lack of credibility of
the taxpayer's testimony; (10) dealings in cash. Laurins v.
Commissioner, 889 F.2d 910, 913 (9th Cir. 1989), affg. Norman v.
Commissioner, T.C. Memo. 1987-265; Edelson v. Commissioner, supra
at 832; Bradford v. Commissioner, 796 F.2d 303, 307 (9th Cir.
1986), affg. T.C. Memo. 1984-601; Petzoldt v. Commissioner, 92
T.C. 661, 699 (1989); Rowlee v. Commissioner, supra at 1125.
These badges of fraud are nonexclusive. Miller v. Commissioner,
94 T.C. 316, 334 (1990).
The list of the badges of fraud, however, is illustrative.
We consider the totality of the facts and circumstances of each
case to determine whether there is fraudulent intent. King's
Court Mobile Home Park, Inc. v. Commissioner, 98 T.C. 511, 516
(1992); Recklitis v. Commissioner, supra.
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