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States v. Bender, 218 F.2d 869 (7th Cir. 1955); Rivera v.
Commissioner, T.C. Memo. 1979-343.
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, supra at 661; Frazier v.
Commissioner, 91 T.C. 1, 12 (1988).
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) unfiled tax returns;
(4) lack of cooperation with tax authorities; (5) implausible or
inconsistent explanations of behavior; (6) concealed assets; and
(7) illegal activity. Bradford v. Commissioner, 796 F.2d 303,
307-308 (9th Cir. 1986), affg. T.C. Memo. 1984-601; Clayton v.
Commissioner, supra at 647; Petzoldt v. Commissioner, 92 T.C.
661, 699-700 (1989); Recklitis v. Commissioner, supra at 910.
As indicated, petitioner argues that for the years in issue
he realized large losses, that he had no Federal income tax
liability, and therefore that no underpayment of tax exists.
Petitioner also argues that respondent has not established that
he fraudulently failed to file income tax returns and
fraudulently underpaid his correct Federal income tax liability.
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