- 8 -
affg. T.C. Memo. 1966-81; Rowlee v. Commissioner, supra at 1123.
Because direct proof of a taxpayer’s intent is rarely available,
fraud may be proven by circumstantial evidence, and reasonable
inferences may be drawn from the relevant facts. See Spies v.
United States, 317 U.S. 492, 499 (1943); Stephenson v.
Commissioner, 79 T.C. 995, 1006 (1982), affd. 748 F.2d 331 (6th
Cir. 1984); Collins v. Commissioner, T.C. Memo. 1994-409.
We often rely on certain indicia of fraud in deciding the
existence of fraud. Although no single factor is necessarily
sufficient to establish fraud, the presence of several indicia is
persuasive circumstantial evidence of fraud. See Beaver v.
Commissioner, 55 T.C. 85, 93 (1970). The “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; (6) failure to
cooperate with tax authorities; (7) income from illegal
activities; (8) an intent to mislead which may be inferred from a
pattern of conduct; and (9) dealings in cash. See Bradford v.
Commissioner, 796 F.2d 303, 307 (9th Cir. 1986), affg. T.C. Memo.
1984-601; Petzoldt v. Commissioner, 92 T.C. 661, 699 (1989);
Rowlee v. Commissioner, supra at 1125. These “badges of fraud”
are nonexclusive, and we may consider other facts indicating
fraud. See Niedringhaus v. Commissioner, 99 T.C. 202, 211
(1992).
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