J. Randall and Jane B. Groves - Page 14




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          may prove fraud by circumstantial evidence because direct                    
          evidence of the taxpayer's intent is rarely available.  See                  
          Stephenson v. Commissioner, 79 T.C. 995, 1005-1006 (1982), affd.             
          748 F.2d 331 (6th Cir. 1984).                                                
               Petitioner recognizes that he is collaterally estopped from             
          contesting each element of section 7203.  Thus, he does not                  
          dispute that he is collaterally estopped from denying that he                
          knew he had the duty to maintain records or supply information               
          and that he willfully failed to do so for 1988 and 1989.  See                
          Kotmair v. Commissioner, 86 T.C. 1253, 1264 (1986).  Petitioner's            
          conviction under section 7203 does not estop him from arguing                
          that he lacked fraudulent intent for 1988 and 1989, but it is                
          evidence that he committed fraud.  See Wilkinson v. Commissioner,            
          T.C. Memo. 1997-410.                                                         
               4.   Badges of Fraud                                                    
               Courts have developed several objective indicators, or                  
          "badges", of fraud.  See Recklitis v. Commissioner, 91 T.C. 874,             
          910 (1988).  Respondent argues that the following badges of fraud            
          are present in this case:  (1) Large understatements of income;              
          (2) inadequate books and records; (3) failure to give accurate               
          information to tax return preparer; (4) failure to cooperate with            
          tax authorities; (5) implausible and inconsistent explanations of            
          behavior; and (6) training, business experience, and knowledge of            
          the income tax laws.                                                         






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