Hector Prowse - Page 19

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          independent evidence of fraudulent intent.  Beaver v.                       
          Commissioner, 55 T.C. 85, 92 (1970).  Fraud may be shown by                 
          circumstantial evidence because direct evidence of the taxpayer’s           
          fraudulent intent is seldom available.  Gajewski v. Commissioner,           
          67 T.C. 181, 200 (1976), affd. without published opinion 578 F.2d           
          1383 (8th Cir. 1978).  The taxpayer’s entire course of conduct              
          may establish the requisite fraudulent intent.  Stone v.                    
          Commissioner, 56 T.C. 213, 223-224 (1971).                                  
               Courts have relied upon a number of indicia or badges of               
          fraud in deciding whether an underpayment of tax is due to fraud.           
          See, e.g., Bradford v. Commissioner, 796 F.2d 303, 307-308 (9th             
          Cir. 1986), affg. T.C. Memo. 1984-601; Clayton v. Commissioner,             
          102 T.C. 632, 647 (1994); Petzoldt v. Commissioner, 92 T.C. 661,            
          700 (1989).  Although no single badge is necessarily sufficient             
          to establish fraud, the existence of several badges of fraud                
          constitutes persuasive circumstantial evidence of fraud.                    
          Petzoldt v. Commissioner, supra at 700.                                     
               Respondent contends that the following badges of fraud are             
          present in this case:  (1) Inadequate records, (2) providing                
          implausible or inconsistent explanations of behavior, (3) pattern           
          of behavior indicating an intent to mislead, and (4) filing false           
          documents.  We agree with respondent.                                       
               The record clearly and convincingly establishes that                   
          petitioner maintained inadequate records with respect to the                






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