Steven H. Toushin - Page 15




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               Respondent has shown that E&A of IL had sufficient earnings            
          and profits during the years in issue to account for all of                 
          petitioner's unreported income in those years.  Petitioner has              
          presented no evidence to the contrary.                                      
               We conclude that respondent has established by clear and               
          convincing evidence an underpayment of tax for 1980, 1981, and              
          1982.                                                                       
               B.  Fraudulent Intent                                                  
               Respondent must also show that for each of the years in                
          issue the taxpayer intended to evade taxes known to be owing by             
          conduct intended to conceal, mislead, or otherwise prevent the              
          collection of taxes.  See Parks v. Commissioner, 94 T.C. at 661;            
          Rowlee v. Commissioner, 80 T.C. 1111, 1123 (1983).                          
               Because direct proof of a taxpayer's intent is rarely                  
          available, fraud may be proven by circumstantial evidence and               
          reasonable inferences may be drawn from relevant facts.  See                
          Spies v. United States, 317 U.S. 492, 499 (1943).  Over the                 
          years, courts have developed a nonexclusive list of factors that            
          demonstrate fraudulent intent.  These badges of fraud include:              
          (1) Understating income, (2) maintaining inadequate records, (3)            
          failing to cooperate with tax authorities, (4) an intent to                 
          mislead which may be inferred from a pattern of conduct, (5)                
          filing false documents, (6) failing to file tax returns, and (7)            
          dealing in cash.  See id.                                                   





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