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from circumstantial evidence. See id.; Traficant v.
Commissioner, 884 F.2d 258, 264 (6th Cir. 1989), affg. and
remanding 89 T.C. 501 (1987).
Courts have looked to several items of circumstantial
evidence–-often referred to as “badges of fraud”–-in determining
whether the taxpayer acted fraudulently. The items relevant in
the instant case are: (1) The understatement of income over an
extended period of time, (2) failure to maintain adequate books
and records, (3) dealing in cash and cashier’s checks, (4)
concealment of assets, and (5) filing false tax returns. See
Conti v. Commissioner, 39 F.3d 658, 662 (6th Cir. 1994), affg.
and remanding 99 T.C. 370 (1992); Smith v. Commissioner, 926 F.2d
1470, 1479 (6th Cir. 1991), affg. 91 T.C. 1049 (1988); Bradford
v. Commissioner, 796 F.2d 303, 307-308 (9th Cir. 1986), affg.
T.C. Memo. 1984-601; Solomon v. Commissioner, 732 F.2d 1459, 1461
(6th Cir. 1984), affg. T.C. Memo. 1982-603; Petzoldt v.
Commissioner, 92 T.C. at 700; Wright v. Commissioner, 84 T.C.
636, 643-644 (1985). Although no single factor is necessarily
sufficient to establish fraud, the existence of several indicia
constitutes persuasive evidence of fraud. See Solomon v.
Commissioner, supra at 1461; Petzoldt v. Commissioner, supra at
700.
We are convinced after applying these criteria to
Mr. Hamilton’s situation that Mr. Hamilton’s underpayment of
taxes was due to fraud. First, Mr. Hamilton’s failure to report
the amounts received in the numerous transactions with Fidelity
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