- 40 -
DiLeo v. Commissioner, 96 T.C. at 874. Fraud is never presumed
and must be established by independent evidence of fraudulent
intent. See Edelson v. Commissioner, supra.
The Commissioner 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. per curiam 748 F.2d 331 (6th Cir. 1984). The
courts have developed a number of objective indicators or
"badges" of fraud, such as: (1) A pattern of substantial
understatements of income, (2) inadequate books and records, (3)
implausible or inconsistent explanations of behavior, (4)
engaging in illegal activities, (5) failure to cooperate with tax
authorities, (6) concealing assets, and (7) dealing in excessive
amounts of cash. See Bradford v. Commissioner, 796 F.2d 303,
307-308 (9th Cir. 1986), affg. T.C. Memo. 1984-601; Estate of
Mazzoni v. Commissioner, 451 F.2d 197, 202 (3d Cir. 1971), affg.
T.C. Memo. 1970-37. We consider all the facts and circumstances
of each case to decide whether fraudulent intent is present. See
King's Court Mobile Home Park, Inc. v. Commissioner, 98 T.C. 511,
516 (1992); Recklitis v. Commissioner, 91 T.C. 874, 910 (1988).
Upon examination of the entire record, we conclude that
petitioner's underpayments of Federal income taxes for the years
1978 through 1983 and 1985 through 1989 are attributable to
Page: Previous 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 NextLast modified: May 25, 2011