- 35 -
Direct evidence of the requisite fraudulent intent is seldom
available. See Petzoldt v. Commissioner, supra at 699; Rowlee v.
Commissioner, 80 T.C. 1111, 1123 (1983). Consequently, respon-
dent may prove fraud by circumstantial evidence. See Toussaint
v. Commissioner, supra at 312; Marsellus v. Commissioner, 544
F.2d 883, 885 (5th Cir. 1977), affg. T.C. Memo. 1975-368; Rowlee
v. Commissioner, supra at 1123.
The courts have identified a number of badges of fraud from
which fraudulent intent may be inferred, including (1) consistent
and substantial understatement of income, (2) inconsistent or
implausible explanations of behavior, (3) lack of credibility of
the taxpayer's testimony, and (4) dealing in cash. See Laurins
v. Commissioner, supra at 913; Bradford v. Commissioner, 796 F.2d
303, 307-308 (9th Cir. 1986), affg. T.C. Memo. 1984-601; Ruark v.
Commissioner, 449 F.2d 311, 312-313 (9th Cir. 1971), affg. per
curiam T.C. Memo. 1969-48; Niedringhaus v. Commissioner, 99 T.C.
at 211; Parks v. Commissioner, supra at 664-665; Miller v.
Commissioner, 94 T.C. 316, 334 (1990); Recklitis v. Commissioner,
supra at 910; Castillo v. Commissioner, 84 T.C. 405, 409 (1985);
Rowlee v. Commissioner, supra at 1125. In addition, the tax-
payer's background and the context of the events in question may
be considered circumstantial evidence of fraud. See Plunkett v.
Commissioner, 465 F.2d 299, 303 (7th Cir. 1972), affg. T.C. Memo.
1970-274; Niedringhaus v. Commissioner, supra at 211. Although
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