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312 (5th Cir. 1984), affg. T.C. Memo. 1984-25; Petzoldt v.
Commissioner, supra at 699-700. Direct evidence of the requisite
fraudulent intent is seldom available. Petzoldt v. Commissioner,
supra at 699; Rowlee v. Commissioner, 80 T.C. 1111, 1123 (1983).
Consequently, the Commissioner may prove fraud by circumstantial
evidence. Toussaint v. Commissioner, supra at 312; Rowlee v.
Commissioner, supra at 1123; see Marsellus v. Commissioner, 544
F.2d 883, 885 (5th Cir. 1977), affg. T.C. Memo. 1975-368.
The courts have identified a number of badges of fraud from
which fraudulent intent may be inferred, including (1) the
understatement of income, (2) the failure to maintain adequate
records as required by the Code and the regulations, (3) provid-
ing incomplete or erroneous information to a tax return preparer
or bookkeeper, (4) dealing in cash, (5) acts designed to conceal
income, and (6) engaging in illegal activity. See Bradford v.
Commissioner, 796 F.2d 303, 307-308 (9th Cir. 1986), affg. T.C.
Memo. 1984-601; Ruark v. Commissioner, 449 F.2d 311, 312-313 (9th
Cir. 1971), affg. per curiam T.C. Memo. 1969-48; Niedringhaus v.
Commissioner, supra at 211. Although no single factor is neces-
sarily sufficient to establish fraud, the existence of several
indicia constitutes persuasive circumstantial evidence of fraud.
Petzoldt v. Commissioner, supra at 700; see Bradford v. Commis-
sioner, supra at 307.
The record establishes that, during each of the taxable
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