- 25 - 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’sPage: Previous 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 NextLast modified: March 27, 2008