Michael and Penny Rhodes - Page 18

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          Memo. 1961-192; Shaw v. Commissioner, 27 T.C. 561, 569-570                  
          (1956), affd. 252 F.2d 681 (6th Cir. 1958).                                 
               Although mere suspicion is not enough, fraud may be proven             
          by circumstantial evidence, and reasonable inferences may be                
          drawn from the facts because direct evidence is rarely available.           
          DiLeo v. Commissioner, 96 T.C. 858, 874 (1991), affd. 959 F.2d 16           
          (2d Cir. 1992); Petzoldt v. Commissioner, supra at 699;                     
          Delvecchio v. Commissioner, T.C. Memo. 2001-130, affd. 37 Fed.              
          Appx. 979 (11th Cir. 2002).                                                 
               Circumstantial evidence that may give rise to a finding of             
          fraud includes:  (1) Understatement of income; (2) inadequate               
          records; (3) failure to file tax returns; (4) providing                     
          implausible or inconsistent explanations of behavior; (5)                   
          concealment of assets; (6) failure to cooperate with taxing                 
          authorities; (7) filing false Forms W-4, Employee’s Withholding             
          Allowance Certificate; (8) failure to make estimated tax                    
          payments; (9) dealing in cash; (10) engaging in illegal activity;           
          (11) attempting to conceal illegal activity; (12) engaging in a             
          pattern of behavior that indicates an intent to mislead; and (13)           
          filing false documents.  Bradford v. Commissioner, 796 F.2d 303,            
          307 (9th Cir. 1986), affg. T.C. Memo. 1984-601; Niedringhaus v.             
          Commissioner, 99 T.C. 202, 211 (1992); Christians v.                        
          Commissioner, T.C. Memo. 2003-130.  These “badges of fraud” are             
          not exclusive.  Niedringhaus v. Commissioner, supra at 211;                 






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