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illegal activities, (7) an intent to mislead which may be
inferred from a pattern of conduct, (8) lack of credibility of
the taxpayer’s testimony, (9) filing false documents, (10)
failing to file tax returns, and (11) dealing in cash. Spies v.
United States, supra at 499; Conti v. Commissioner, 39 F.3d 658,
662 (6th Cir. 1994), affg. and remanding on other grounds T.C.
Memo. 1992-616; Douge v. Commissioner, 899 F.2d 164, 168 (2d Cir.
1990); Bradford v. Commissioner, 796 F.2d 303, 307-308 (9th Cir.
1986), affg. T.C. Memo. 1984-601; Recklitis v. Commissioner, 91
T.C. 874, 910 (1988). Although no single factor is necessarily
sufficient to establish fraud, the existence of several indicia
constitutes persuasive circumstantial evidence of fraud. See
Bradford v. Commissioner, supra at 307; Petzoldt v. Commissioner,
supra at 700. Finally, although not dispositive, a conviction
for filing false Federal income tax returns under section 7206(1)
is evidence of fraudulent intent. See Wright v. Commissioner, 84
T.C. 636, 643-644 (1985); Miller v. Commissioner, T.C. Memo.
1989-461.
Petitioners concede they had unreported income resulting in
the deficiencies as determined by respondent for 1987 and 1988,
which establishes an underpayment for each year. However, they
contend that the underpayments were not due to fraud.
Petitioners mount a number of arguments to show that they lacked
the requisite fraudulent intent.
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