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(1982), affd. 722 F.2d 695 (11th Cir. 1984). Transactions are
treated as lacking economic substance if the transactions do not
have any practicable economic effect other than creation of
claimed tax benefits. Karr v. Commissioner, supra at 1023.
To establish fraud, respondent must prove by clear and
convincing evidence that a taxpayer understated the taxpayer's
correct tax liability and that part of the understatement was due
to fraudulent intent. Secs. 6653(b), 7454(a); Rule 142(b);
Korecky v. Commissioner, 781 F.2d 1566, 1568 (11th Cir. 1986),
affg. T.C. Memo. 1985-63; Clayton v. Commissioner, 102 T.C. 632,
646 (1994); Recklitis v. Commissioner, 91 T.C. 874, 909 (1988).
With regard to fraudulent intent, respondent is required to
prove that a taxpayer intended to evade taxes by conduct intended
to conceal, mislead, or otherwise prevent the collection of
taxes. Parks v. Commissioner, 94 T.C. 654, 661 (1990); Frazier
v. Commissioner, supra at 12.
Generally, fraud is established by circumstantial evidence
because direct evidence of fraud is not available. Clayton v.
Commissioner, supra at 647; Rowlee v. Commissioner, 80 T.C. 1111,
1123 (1983). Courts have developed certain indicia of fraud,
including the following: (1) Understatements of income;
(2) inadequate books and records; (3) failure to file tax
returns; and (4) failure to cooperate with tax authorities.
Bradford v. Commissioner, 796 F.2d 303, 307-308 (9th Cir. 1986),
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