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as an intentional wrongdoing designed to evade tax believed to be
owing. Edelson v. Commissioner, 829 F.2d 828, 833 (9th Cir.
1987), affg. T.C. Memo. 1986-223. The Commissioner must prove
fraud by clear and convincing evidence. Rule 142(b).
To satisfy this burden, the Commissioner must show (1) that
an underpayment exists, and (2) that the taxpayer intended to
evade taxes known to be owing by conduct intended to conceal,
mislead, or otherwise prevent the collection of taxes. Parks v.
Commissioner, 94 T.C. 654, 660-661 (1990).
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). Fraud
is never presumed and must be established by independent evidence
of fraudulent intent. Edelson v. Commissioner, supra. Fraud may
be shown by circumstantial evidence because direct evidence of
the taxpayer’s fraudulent intent is seldom available. 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.
Stone v. Commissioner, 56 T.C. 213, 223-224 (1971).
To decide whether the fraud penalty is applicable, courts
consider several indicia of fraud, or “badges of fraud”, which
include: (1) Understatement of income; (2) inadequate books and
records; (3) failure to file tax returns; (4) implausible or
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