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Respondent must also prove by clear and convincing evidence
that petitioner had the requisite fraudulent intent. Fraudulent
intent may be proven by circumstantial evidence and reasonable
inferences drawn from proven facts, because direct proof of a
taxpayer's intent is rarely available. Spies v. United States,
317 U.S. 492, 499 (1943); Rowlee v. Commissioner, 80 T.C. 1111
(1983). Because respondent's assertion of fraud requires an
inquiry into the taxpayer's frame of mind, a single act or
omission seldom demonstrates the necessary fraudulent intent.
Rather, the existence of the fraudulent intent must generally be
determined by surveying a taxpayer's entire course of conduct.
Stone v. Commissioner, 56 T.C. 213, 220 (1971); Bradford v.
Commissioner, T.C. Memo. 1984-601, affd. 796 F.2d 303 (9th Cir.
1986).
Because fraudulent intent is rarely established by direct
evidence, the Court of Appeals for the Ninth Circuit, the court
to which this case is appealable, has inferred intent from
various kinds of circumstantial evidence. Bradford v.
Commissioner, 796 F.2d at 307. These badges of fraud include:
(1) Understatement of income; (2) inadequate records; (3) failure
to file tax returns; (4) implausible or inconsistent explanations
of behavior; (5) concealing assets; and (6) failure to cooperate
with tax authorities. Id. Furthermore, in Bradford, the Court
of Appeals found that the following facts support a finding of
fraud: (1) Engaging in illegal activities; (2) efforts to
conceal such illegal activity; (3) dealing in cash to avoid
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