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evidence and reasonable inferences drawn from the facts. See
Spies v. United States, 317 U.S. 492, 499 (1943); Stephenson v.
Commissioner, 79 T.C. 995 (1982), affd. per curiam 748 F.2d 331
(6th Cir. 1984); Collins v. Commissioner, T.C. Memo. 1994-409.
The taxpayer’s entire course of conduct may establish the
requisite fraudulent intent. See Otsuki v. Commissioner, supra
at 106.
Over the years, the courts have identified a number of
objective indicators or “badges” of fraud. See Recklitis v.
Commissioner, 91 T.C. 874, 910 (1988); Kish v. Commissioner, T.C.
Memo. 1998-16. Several badges of fraud are present in this case:
(1) Substantially understating income for 3 consecutive years;
(2) having inadequate books and records or destroying books and
records; (3) providing incomplete and erroneous information to a
tax return preparer; (4) providing implausible explanations of
behavior; (5) giving false, misleading, and inconsistent
testimony at trial, and (6) dealing in large amounts of cash.
See Bradford v. Commissioner, 796 F.2d 303, 307-308 (9th Cir.
1986), affg. T.C. Memo. 1984-601; Meier v. Commissioner, 91 T.C.
273, 297-298 (1988); Lee v. Commissioner, T.C. Memo. 1995-597.
Although no single factor is necessarily sufficient to
establish fraud, the combination of a number of factors
constitutes persuasive evidence. See Solomon v. Commissioner,
732 F.2d 1459, 1461 (6th Cir. 1984), affg. per curiam T.C. Memo.
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