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Over the years, courts have developed a nonexclusive list of
factors that demonstrate fraudulent intent. These badges of
fraud include: (1) Understating income, (2) maintaining
inadequate records, (3) failing to file tax returns, (4)
implausible or inconsistent explanations of behavior, (5)
concealment of income or assets, (6) failing to cooperate with
tax authorities, (7) engaging in illegal activities, (8) an
intent to mislead which may be inferred from a pattern of
conduct, (9) lack of credibility of the taxpayer's testimony,
(10) filing false documents, and (11) dealing in cash. See Spies
v. United States, 317 U.S. 492, 499 (1943); Douge v.
Commissioner, 899 F.2d 164, 168 (2d Cir. 1990); Bradford v.
Commissioner, 796 F.2d 303, 307-308 (9th Cir. 1986), affg. T.C.
Memo. 1984-601; Recklitis v. Commissioner, 91 T.C. 874, 910
(1988). Although no single factor is necessarily sufficient to
establish fraud, the combination of a number of factors
constitutes persuasive evidence. Solomon v. Commissioner, 732
F.2d 1459, 1461 (6th Cir. 1984), affg. per curiam T.C. Memo.
1982-603. A taxpayer's intelligence, education, and tax
expertise are also relevant for purposes of determining
fraudulent intent. See Stephenson v. Commissioner, 79 T.C. 995,
1006 (1982), affd. 748 F.2d 331 (6th Cir. 1984); Iley v.
Commissioner, 19 T.C. 631, 635 (1952). We note that some conduct
and evidence can be classified under more than one factor.
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