Louis E. Peyton - Page 16

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          1002, 1004 (3d Cir. 1968); Webb v. Commissioner, 394 F.2d 366,              
          377 (5th Cir. 1968), affg. T.C. Memo. 1966-81; Powell v.                    
          Granquist, 252 F.2d 56, 60 (9th Cir. 1958).  Stated differently,            
          imposition of the civil fraud penalty is appropriate upon a                 
          showing that the taxpayer intended to evade taxes believed to be            
          owing by conduct designed to conceal, mislead, or otherwise                 
          prevent the collection of taxes.  DiLeo v. Commissioner, 96 T.C.            
          at 874.                                                                     
               The existence of fraud is a question of fact to be resolved            
          upon consideration of the entire record.  DiLeo v. Commissioner,            
          supra at 874; Gajewski v. Commissioner, 67 T.C. 181, 199 (1976),            
          affd. without published opinion 578 F.2d 1383 (8th Cir. 1978).              
          Fraud will never be presumed.  Recklitis v. Commissioner, 91 T.C.           
          874, 909-910 (1988); Beaver v. Commissioner, 55 T.C. 85, 92                 
          (1970).  However, because direct proof of a taxpayer’s intent is            
          seldom available, fraud may be established by circumstantial                
          evidence.  Spies v. United States, 317 U.S. 492, 499-500 (1943);            
          DiLeo v. Commissioner, supra at 874.  In this connection, courts            
          have developed a nonexclusive list of circumstantial indicia, or            
          “badges”, of fraud that will support a finding of fraudulent                
          intent.                                                                     
               Among the badges of fraud that can be distilled from caselaw           
          are the following:  (1) Understatement of income; (2) maintenance           
          of inadequate records; (3) failure to file tax returns;                     






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