Howard and Linda Levine - Page 7




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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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