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Rowlee v. Commissioner, 80 T.C. 1111, 1123 (1983). “Fraud * * *
requires intentional wrongdoing. * * * To establish liability,
the Commissioner [has] to show knowing falsehood”. Laurins v.
Commissioner, 889 F.2d 910, 913 (9th Cir. 1989), affg. Norman v.
Commissioner, T.C. Memo. 1987-265.
The existence of fraud is a question of fact to be resolved
upon consideration of the entire record. See Gajewski v.
Commissioner, 67 T.C. 181, 199 (1976), affd. without published
opinion 578 F.2d 1383 (8th Cir. 1978). Fraudulent intent is
rarely established by direct evidence. As a consequence, courts
have inferred fraudulent intent from various kinds of
circumstantial evidence. Some of the indicia of fraud that have
been recognized include: (1) Understatement of income, (2)
failure to keep adequate records, (3) failure to file tax
returns, (4) implausible or inconsistent explanations of
behavior, (5) concealing assets, (6) failure to cooperate with
tax authorities, (7) engaging in illegal activities, (8)
attempting to conceal illegal activities, and (9) dealing in
cash. See Bradford v. Commissioner, 796 F.2d 303, 307-308 (9th
Cir. 1986), affg. T.C. Memo. 1984-601. Petitioner did all of
these.
While willful failure to file does not in itself establish
liability for additions to tax on account of fraud, such failure
may be properly considered in connection with other facts in
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