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circumstantial evidence and reasonable inferences drawn from the
facts. See Spies v. United States, 317 U.S. 492, 499 (1943);
Bradford v. Commissioner, 796 F.2d 303, 307 (9th Cir. 1986),
affg. T.C. Memo. 1984-601.
Over the years, courts have developed a nonexclusive list of
factors that demonstrate fraudulent intent. 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) concealment of income
or assets, (6) failure to cooperate with tax authorities, (7)
presence of illegal activities, (8) an intent to mislead which
may be inferred from a pattern of conduct, (9) lack of
credibility of the taxpayer’s testimony, (10) filing false
documents, and (11) dealing in cash. See Spies v. United States,
supra at 499; Douge v. Commissioner, 899 F.2d 164, 168 (2d Cir.
1990), affg. an order of this Court; Laurins v. Commissioner, 889
F.2d at 913; Bradford v. Commissioner, supra at 307-308;
Recklitis v. Commissioner, 91 T.C. 874, 910 (1988). Although no
single factor is necessarily sufficient to establish fraud, the
combination of a number of factors constitutes persuasive
evidence. See Solomon v. Commissioner, 732 F.2d 1459, 1461 (6th
Cir. 1984), affg. per curiam T.C. Memo. 1982-603. A taxpayer’s
intelligence, education, and tax expertise are also relevant for
purposes of determining fraudulent intent. See Stephenson v.
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