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OPINION
To establish fraud, respondent has the burden of proving by
clear and convincing evidence that the taxpayer made an
underpayment of Federal income taxes and that the taxpayer's
underpayment was due to fraudulent intent. Sec. 7454(a); Rule
142(b); Douge v. Commissioner, 899 F.2d 164, 168 (2d Cir. 1990),
affg. in part, revg. in part, and remanding an Order of this Court;
Schaffer v. Commissioner, 779 F.2d 849, 857 (2d Cir. 1985), affg.
in part and remanding Mandina v. Commissioner, T.C. Memo. 1982-34;
Clayton v. Commissioner, 102 T.C. 632, 646 (1994); Recklitis v.
Commissioner, 91 T.C. 874, 909 (1988).
Because there is rarely direct proof of fraudulent intent,
respondent may sustain his burden utilizing circumstantial
evidence. Douge v. Commissioner, supra; Schaffer v. Commissioner,
supra; Clayton v. Commissioner, supra at 647; Rowlee v.
Commissioner, 80 T.C. 1111, 1123 (1983).
Courts have developed certain indicia of fraud, including the
following: (1) Understatements of income; (2) inadequate books and
records; (3) failure to file income tax returns; (4) implausible or
inconsistent explanations of behavior; (5) concealed assets;
(6) failure to cooperate with tax authorities; (7) dealing in cash;
(8) filing false documents; and (9) false statements. United
States v. Klausner, 80 F.3d 55, 62 (2d Cir. 1996); Douge v.
Commissioner, supra (citing Bradford v. Commissioner, 796 F.2d 303,
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Last modified: May 25, 2011