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Giving false, misleading, and inconsistent testimony is another
badge of fraud. See, e.g., Kim v. Commissioner, T.C. Memo. 2000-
83. Failure to cooperate with revenue agents during the audit
phase of a case is an additional indication of guilty knowledge
on a taxpayer’s part. See Profl. Servs. v. Commissioner, 79 T.C.
888, 932-933 (1982). Concealing assets also indicates fraudulent
intent. See Spies v. United States, 317 U.S. at 499. In
determining fraudulent intent, courts also have considered a
taxpayer’s level of education and his or her prior history of
filing Federal income tax returns. See, e.g., Stoltzfus v.
United States, 398 F.2d 1002, 1004 (3d Cir. 1968).
Respondent contends that the following indicia of fraud are
present in the instant cases: Failing to report substantial
amounts of income, failing to maintain records, dealing
exclusively in cash, failing to voluntarily file tax returns,
concealing transactions through fraudulent conveyances, and
failing to cooperate in the examination. In addition, respondent
asserts that the lack of credibility of petitioners and their
witnesses is another indicium of fraud.
(1) Pattern of Underreporting Substantial Amounts of
Income
Respondent contends that the source and application of funds
analysis for Frank and Katherine shows that they consistently and
substantially understated their income for at least 8 years.
Petitioners contend that Frank and Katherine reported their
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