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taxpayer’s entire course of conduct and drawing reasonable
inferences therefrom. Korecky v. Commissioner, supra at 1568.
Fraud is rarely provable by direct evidence but may be
provable by circumstantial evidence. Brooks v. Commissioner, 82
T.C. 413, 431 (1984), affd. without published opinion 772 F.2d
910 (9th Cir. 1985). Such evidence includes, but is not limited
to the following “badges of fraud”: (1) Understating income, (2)
maintaining inadequate records, (3) failing to file tax returns,
(4) giving implausible or inconsistent explanations of behavior,
(5) concealing income or assets, (6) failing to cooperate with
tax authorities, (7) engaging in illegal activities, (8) an
intent to mislead which may be inferred from a pattern of
conduct, (9) lack of credibility of the taxpayer’s testimony,
(10) filing false documents, and (11) dealing in cash. See
Bradford v. Commissioner, 796 F.2d 303, 307 (9th Cir. 1986),
affg. T.C. Memo. 1984-601; Recklitis v. Commissioner, 91 T.C.
874, 910 (1988); Kalo v. Commissioner, T.C. Memo. 1996-482. No
single factor is necessarily dispositive, but a combination of
several factors is persuasive circumstantial evidence of fraud.
Petzoldt v. Commissioner, 92 T.C. at 699. We find substantial
evidence of fraud in this case.
The record shows a consistent pattern of understating income
by petitioner. For the years in issue, petitioner received
substantial amounts of income from his real estate business,
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