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96 T.C. 858, 874 (1991), affd. 959 F.2d 16 (2d Cir. 1992); Estate
of Pittard v. Commissioner, 69 T.C. 391 (1977). Fraud is never
presumed and must be established by independent evidence that
establishes fraudulent intent. Edelson v. Commissioner, supra;
Beaver v. Commissioner, 55 T.C. 85, 92 (1970). Fraud may be
proven by circumstantial evidence because direct evidence of the
taxpayer's fraudulent intent is seldom available. Spies v.
United States, 317 U.S. 492 (1943); Rowlee v. Commissioner, 80
T.C. 1111 (1983); Gajewski v. Commissioner, 67 T.C. 181, 199
(1976), affd. without published opinion 578 F.2d 1383 (8th Cir.
1978). The taxpayer's entire course of conduct may establish the
requisite fraudulent intent. Stone v. Commissioner, 56 T.C. 213,
223-224 (1971); Otsuki v. Commissioner, 53 T.C. 96, 105-106
(1969).
Courts have developed several indicia, or "badges", that
tend to establish fraud. They include: (1) Understatement of
income, (2) inadequate books and records, (3) failure to file tax
returns, (4) implausible or inconsistent explanations of
behavior, (5) concealment of assets, (6) failure to cooperate
with tax authorities, (7) filing false Forms W-4, (8) failure to
make estimated tax payments, (9) dealing in cash, (10) engaging
in illegal activity, and (11) attempting to conceal illegal
activity. Douge v. Commissioner, 899 F.2d 164, 168 (2d Cir.
1990); Bradford v. Commissioner, supra at 307; Recklitis v.
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