Frank H. and Marla C. Black - Page 25

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          intent to mislead which may be inferred from a pattern of                   
          conduct, and lack of credibility of the taxpayer’s testimony.               
          Spies v. United States, supra at 499.  The taxpayer's background            
          and the context of the events in question may be considered as              
          circumstantial evidence of fraud.  Spies v. United States, supra            
          at 497; 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).                                                    
               The instant case involves numerous badges of fraud.  Mr.               
          Black grossly understated his income.  The 1991 and 1992 joint              
          returns reported negative taxable income of $49,538 and $11,981,            
          respectively.  Even after respondent’s minor concessions at                 
          trial, petitioners failed to report substantial amounts of                  
          income, including commissions from Clark Capital of $21,843.36.             
          Petitioners argue that their omission was an oversight on their             
          part because Mr. Black did not receive a Form 1099 from Clark               
          Capital.  However, Mr. Black testified at trial that he                     
          maintained records of his business gross receipts, that he knew             
          he had received the Clark Capital commissions, and that he had              
          recorded the commission checks in his records.  Mr. Black failed            
          to provide such records to his return preparer.                             
               Petitioners’ standard of living was inconsistent with the              
          negative income reported on the 1991 and 1992 joint returns.                
          Petitioners hired a housekeeper and paid for their daughter’s               

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