- 8 -
underpayment for each taxable year in issue was due to fraud.
Profl. Servs. v. Commissioner, 79 T.C. 888, 930 (1982). The
existence of fraud is a question of fact to be resolved from the
entire record. Gajewski v. Commissioner, 67 T.C. 181, 199
(1976), affd. without published opinion 578 F.2d 1383 (8th Cir.
1978). 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 the relevant facts.
Spies v. United States, 317 U.S. 492, 499 (1943); Stephenson v.
Commissioner, 79 T.C. 995, 1006 (1982), affd. 748 F.2d 331 (6th
Cir. 1984). Mere suspicion, however, does not prove fraud.
Cirillo v. Commissioner, 314 F.2d 478, 482 (3d Cir. 1963), affg.
in part and revg. in part T.C. Memo. 1961-192; Katz v.
Commissioner, 90 T.C. 1130, 1144 (1988); Shaw v. Commissioner, 27
T.C. 561, 569-570 (1956), affd. 252 F.2d 681 (6th Cir. 1958).
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) implausible or inconsistent explanations
of behavior, (4) concealment of income or assets, (5) failing to
cooperate with tax authorities, (6) engaging in 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
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011