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Fraud is defined as an intentional wrongdoing designed to
evade tax known or believed to be owing. Edelson v.
Commissioner, 829 F.2d 828, 833 (9th Cir. 1987), affg. T.C. Memo.
1986-223; Bradford v. Commissioner, 796 F.2d 303, 307 (9th Cir.
1986), affg. T.C. Memo. 1984-601. 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 that establishes fraudulent
intent. Beaver v. Commissioner, 55 T.C. 85, 92 (1970). Fraud
may be proven by circumstantial evidence because direct evidence
of the taxpayer’s fraudulent intent is seldom available. Rowlee
v. Commissioner, 80 T.C. 1111, 1123 (1983). The taxpayer’s
entire course of conduct may establish the requisite fraudulent
intent. Niedringhaus v. Commissioner, 99 T.C. 202, 210 (1992).
Courts have developed several indicia, or “badges of fraud”,
from which the requisite fraudulent intent can be inferred. They
include: (1) Failing to file tax returns, (2) understating
income, (3) concealing assets, (4) failing to cooperate with tax
authorities, (5) making frivolous arguments, (6) failing to make
estimated tax payments, (7) giving implausible or inconsistent
explanations of behavior, and (8) being convicted of willful
failure to file an income tax return. Douge v. Commissioner, 899
F.2d 164, 168 (2d Cir. 1990); Bradford v. Commissioner, supra at
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Last modified: May 25, 2011