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Respondent determined that petitioner was liable for
additions to tax under section 6651(f) for his fraudulent failure
to file income tax returns for 1997 through 2000. As badges of
his fraudulent failure to file, respondent maintains that
petitioner attempted to hide his income through the following
methods: Materially understating his income on the late-filed
Federal tax returns; intentionally delaying filing his Federal
tax returns; failing to cooperate in the examination process;
establishing sham trusts; participating actively through 2000 in
the sale and dissemination of abusive tax avoidance trusts; and
advancing frivolous tax protester arguments including the letter
received by respondent’s agent.
III. Section 6651(f) Addition to Tax
In Bradford v. Commissioner, 796 F.2d 303, 307 (9th Cir.
1986), affg. T.C. Memo. 1984-601, the Court of Appeals for the
Ninth Circuit observed that because “fraudulent intent is rarely
established by direct evidence, this court has inferred intent
from various kinds of circumstantial evidence”. See also Spies
v. United States, 317 U.S. 492, 499 (1943); Niedringhaus v.
Commissioner, supra; Stone v. Commissioner, supra; Otsuki v.
Commissioner, supra at 106. Thus, over the years, courts have
developed a nonexclusive list of indicia as circumstantial
evidence of fraudulent intent. As relevant to this report, we
discuss the following “badges of fraud”: (1) Understating
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