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is not sufficient to establish a taxpayer’s liability for the
fraud penalty. Olinger v. Commissioner, 234 F.2d 823 (5th Cir.
1956), affg. in part and revg. in part on another ground T.C.
Memo. 1955-9; Davis v. Commissioner, 184 F.2d 86, 87 (10th Cir.
1950); Green v. Commissioner, 66 T.C. 538, 550 (1976); Axelrod v.
Commissioner, T.C. Memo. 1982-92, affd. 711 F.2d 1062 (9th Cir.
1983).
Courts have relied upon a number of indicia or badges of
fraud in deciding whether an underpayment of tax is due to fraud.
E.g., Bradford v. Commissioner, 796 F.2d 303, 307-308 (9th Cir.
1986), affg. T.C. Memo. 1984-601; Clayton v. Commissioner, 102
T.C. 632, 647 (1994); Petzoldt v. Commissioner, 92 T.C. 661, 700
(1989). Although no single badge is necessarily sufficient to
establish fraud, the existence of several badges of fraud
constitutes persuasive circumstantial evidence of fraud.
Petzoldt v. Commissioner, supra.
Respondent contends that the following badges of fraud are
present in this case: (1) Understatement of income; (2) failure
to file tax returns; (3) implausible or inconsistent explanations
of behavior; (4) concealment of assets; (5) failure to cooperate
with tax authorities; (6) engaging in illegal activity; (7)
attempting to conceal illegal activity; and (8) extensive
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