Investment Research Associates - Page 232




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         showing a consistent underreporting of income, when accompanied               
         by circumstances evidencing an intent to conceal, may justify a               
         strong inference of fraud.  See Parks v. Commissioner, 94 T.C.                
         654, 664, (1990).                                                             
              Additions to tax for fraud have been upheld where taxpayers              
         received income from illegal kickback schemes.  See Tregre v.                 
         Commissioner, T.C. Memo. 1996-243, affd. without published                    
         opinion 129 F.3d 609 (5th Cir. 1997); DeVaughn v. Commissioner,               
         T.C. Memo. 1983-712; Hanhauser v. Commissioner, T.C. 1978-504.                
         These cases bear some factual similarities to the instant cases.              
         Factors Indicative of Fraudulent Intent                                       
              Courts have relied on a number of indicia of fraud in                    
         deciding fraud cases.  The existence of several indicia is                    
         persuasive circumstantial evidence of fraud.  See Solomon v.                  
         Commissioner, 732 F.2d 1459, 1461 (6th Cir. 1984), affg. per                  
         curiam T.C. Memo. 1982-603.  A non-exclusive list of                          
         circumstantial evidence which gives rise to a finding of                      
         fraudulent intent includes: (1) a pattern of understating income              
         over an extended period of time; see Foster v. Commissioner, 391              
         F.2d 727, 733 (4th Cir. 1968), affg. in part, revg. in part T.C.              
         Memo. 1965-246); (2) implausible or inconsistent explanations of              
         behavior; see Bahoric v. Commissioner, 363 F.2d 151, 153 (9th                 
         Cir. 1966); Factor v. Commissioner, 281 F.2d 100 (9th Cir. 1960),             
         affg. T.C. Memo. 1958-94; (3) failure to cooperate with tax                   






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