George Maciel - Page 44

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          Commissioner, 763 F.2d 1139, 1143 (10th Cir. 1985), affg. T.C.              
          Memo. 1984-152 (quoting 10 Mertens, Law of Federal Income                   
          Taxation, sec. 55.10, at 46 (1984)).  A taxpayer’s background and           
          the context of the events in question may be considered in                  
          determining fraudulent intent.  Plunkett v. Commissioner, 465               
          F.2d 299 (7th Cir. 1972), affg. T.C. Memo. 1970-274; see Temple             
          v. Commissioner, supra (a taxpayer’s level of education and his             
          prior history of filing income tax returns are relevant to the              
          inquiry).                                                                   
               Because it is difficult to prove fraudulent intent by direct           
          evidence, fraud can be inferred from various kinds of                       
          circumstantial evidence.  Courts describe these “badges of fraud”           
          as including the following:  (1) Understatement of income;51 (2)            
          failing to maintain adequate records; (3) failure to file tax               
          returns; (4) implausible or inconsistent explanations; (5)                  
          concealment of assets; (6) failure to cooperate with tax                    
          authorities; (7) the filing of false documents; (8) making of               
          false and inconsistent statements to revenue agents; (9)                    
          concealing income from a taxpayer’s tax preparer; and (10)                  


               51“The consistent understatement of large amounts of income            
          for a number of years is evidence of willful intent to evade.”              
          Otsuki v. Commissioner, 53 T.C. 96, 108 (1969).  In Holland v.              
          United States, 348 U.S. 121, 139 (1954), “the Supreme Court                 
          declared that ‘evidence of a consistent pattern of underreporting           
          large amounts of income’ will support ‘an inference of                      
          willfulness’”.  Otsuki v. Commissioner, supra at 108.                       






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