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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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