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evidence, both elements of fraud. Fairchild v. United States,
240 F.2d 944, 947 (5th Cir. 1957); Olinger v. Commissioner, 234
F.2d 823 (5th Cir. 1956), affg. in part and revg. in part T.C.
Memo. 1955-9; Drieborg v. Commissioner, 225 F.2d 216, 218 (6th
Cir. 1955), affg. in part and revg. in part a Memorandum Opinion
of this Court; Estate of Beck v. Commissioner, 56 T.C. 297, 363
(1971); Otsuki v. Commissioner, 53 T.C. 96, 106 (1969).
2. Fraudulent Intent
Respondent bears the burden of proving by clear and
convincing evidence that petitioner had fraudulent intent. Sec.
7454(a); Rule 142(b). Fraudulent intent may be proved by
circumstantial evidence because direct evidence of fraud is
rarely available. Niedringhaus v. Commissioner, 99 T.C. 202, 210
(1992); Petzoldt v. Commissioner, supra; Gajewski v.
Commissioner, 67 T.C. 181, 200 (1976), affd. without published
opinion 578 F.2d 1383 (8th Cir. 1978).
a. Section 7206 Conviction
Respondent contends that petitioner’s conviction under
section 7206(1) for 1985 shows that petitioner’s underpayment of
tax for 1985 is due to fraud. We disagree. A section 7206(1)
conviction is a badge of fraud. Bradford v. Commissioner, 796
F.2d 303, 307-308 (9th Cir. 1986), affg. T.C. Memo. 1984-601;
Wright v. Commissioner, 84 T.C. 636, 641, 643 (1985). However, a
finding of fraudulent intent is not essential to a conviction
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