- 37 - fraud may be proved by circumstantial evidence and reasonable inferences from the facts. Petzoldt v. Commissioner, supra; Rowlee v. Commissioner, 80 T.C. 1111, 1123 (1983). The courts have recognized numerous indicia or “badges” of fraud, including the following: (1) A pattern of underreporting income; (2) maintaining inadequate records; (3) giving implausible or inconsistent explanations of behavior; (4) making false entries; (5) dealing in cash; (6) engaging in illegal activities; and (7) the lack of credibility of taxpayer’s testimony. Spies v. United States, 317 U.S. 492, 499 (1943); Conti v. Commissioner, 39 F.3d 658, 662 (6th Cir. 1994), affg. and remanding on other grounds 99 T.C. 370 (1992) and T.C. Memo. 1992-616; Douge v. Commissioner, 899 F.2d 164, 168 (2d Cir. 1990); Laurins v. Commissioner, 889 F.2d 910 (9th Cir. 1989), affg. Norman v. Commissioner, T.C. Memo. 1987-265; Bradford v. Commissioner, 796 F.2d 303, 307-308 (9th Cir. 1986), affg. T.C. Memo. 1984-601; Korecky v. Commissioner, 781 F.2d 1566 (11th Cir. 1986), affg. T.C. Memo. 1985-63; Bingham v. Commissioner, T.C. Memo. 1998-102, affd. without published opinion 188 F.3d 512 (9th Cir. 1999). Although no single factor is necessarily sufficient to establish fraud, the existence of several indicia constitutes persuasive circumstantial evidence of fraud. Petzoldt v. Commissioner, supra at 700. Further, the taxpayer’s background, including his sophistication, experience, and education may be consideredPage: Previous 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 Next
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