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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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