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The existence of fraud is a question of fact to be resolved
upon consideration of the entire record. DiLeo v. Commissioner,
96 T.C. 858, 874 (1991), affd. 959 F.2d 16 (2d Cir. 1992); Estate
of Pittard v. Commissioner, 69 T.C. 391 (1977). Fraud is never
presumed and must be established by independent evidence that
establishes fraudulent intent. Edelson v. Commissioner, supra;
Beaver v. Commissioner, 55 T.C. 85, 92 (1970). Fraud may be
proven by circumstantial evidence because direct evidence of the
taxpayer’s fraudulent intent is seldom available. Spies v.
United States, 317 U.S. 492 (1943); Rowlee v. Commissioner, 80
T.C. 1111 (1983); Gajewski v. Commissioner, 67 T.C. 181, 199
(1976), affd. without published opinion 578 F.2d 1383 (8th Cir.
1978). The taxpayer’s entire course of conduct may establish the
requisite fraudulent intent. Niedringhaus v. Commissioner, 99
T.C. 202 (1992); Stone v. Commissioner, 56 T.C. 213, 223-224
(1971); Otsuki v. Commissioner, 53 T.C. 96, 105-106 (1969).
Courts have developed several indicia, or "badges of fraud",
from which the requisite fraudulent intent can be inferred. They
include: (1) Failing to file income tax returns, (2)
understating income, (3) concealing assets, (4) failing to
cooperate with tax authorities, (5) making frivolous arguments,
(6) failing to make estimated tax payments, (7) giving
implausible or inconsistent explanations of behavior, and (8)
being convicted of willful failure to file an income tax return.
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Last modified: May 25, 2011