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return filed for each of those years. In addition to the amended
returns, an underpayment of tax for each year is further
demonstrated by respondent’s net worth analysis, the validity of
which is supported by evidence in the record that establishes
both the existence of a likely source of unreported income (i.e.,
Grand Video), and the implausibility of petitioner’s claim to the
existence of a cash hoard not taken into account in the net worth
analysis. See Parks v. Commissioner, supra at 661. Respondent
has met his burden of establishing an underpayment of tax for
each year in issue by clear and convincing evidence.
Respondent must also establish that a portion of the
underpayment of tax for each year is due to fraud. Fraud will be
found if, at the time petitioner filed his return for each year
in issue, he “intended to evade taxes known to be owing by
conduct intended to conceal, mislead, or otherwise prevent the
collection of such taxes.” Rowlee v. Commissioner, 80 T.C. 1111,
1123 (1983).
Because fraudulent intent is seldom established by direct
evidence, it may be reasonably inferred from circumstantial
evidence, including evidence of a taxpayer’s course of conduct.
See United States v. Walton, 909 F.2d 915, 926 (6th Cir. 1990);
Rowlee v. Commissioner, supra; Stone v. Commissioner, 56 T.C.
213, 224 (1971). Conduct that may indicate fraudulent intent,
commonly referred to as “badges of fraud”, includes, but is not
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