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penalty shall not apply to that portion of the underpayment.
Sec. 6663(b).
“Fraud is defined as an intentional wrongdoing designed to
evade tax believed to be owing.” DiLeo v. Commissioner, supra at
889 (citing Profl. Servs. v. Commissioner, 79 T.C. 888, 930
(1982)). To prove fraud, the Commissioner “must show that * * *
[the taxpayer] intended to evade taxes known to be owing by
conduct intended to conceal, mislead, or otherwise prevent the
collection of taxes.” Petzoldt v. Commissioner, 92 T.C. at 699
(citing Stoltzfus v. United States, 398 F.2d 1002, 1004 (3d Cir.
1968)). Because direct evidence of a taxpayer’s intent is rarely
available, the Commissioner may prove fraudulent intent using
circumstantial evidence. Spies v. United States, 317 U.S. 492,
499 (1943); DiLeo v. Commissioner, supra at 874; Parks v.
Commissioner, supra at 664; Petzoldt v. Commissioner, supra. We
consider the taxpayer’s entire course of conduct in determining
fraud, and we may draw reasonable inferences from the facts.
Parks v. Commissioner, supra at 664; Otsuki v. Commissioner, 53
T.C. 96, 106 (1969).
The indicia or badges of fraud serve as circumstantial
evidence of fraudulent intent. DiLeo v. Commissioner, supra at
875. These badges of fraud include: (1) A pattern of consistent
underreporting of income; (2) failure to cooperate with tax
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