Terrell Equipment Company, Inc., et al. - Page 10




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          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.  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             
          returns, and (11) dealing in cash.  Spies v. United States,                 
          supra at 499; Douge v. Commissioner, 899 F.2d 164, 168 (2d Cir.             
          1990); Bradford v. Commissioner, 796 F.2d 303, 307-308 (9th Cir.            
          1986), affg. T.C. Memo. 1984-601; Recklitis v. Commissioner, 91             
          T.C. 874, 910 (1988).  Although no single factor is necessarily             
          sufficient to establish fraud, the combination of a number of               
          factors constitutes persuasive evidence.  Solomon v.                        
          Commissioner, 732 F.2d 1459, 1461 (6th Cir. 1984), affg. per                
          curiam T.C. Memo. 1982-603.                                                 






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