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92 (1970). Fraud may, however, be proved by circumstantial
evidence and inferences drawn from the facts because direct proof
of a taxpayer’s intent is rarely available. Niedringhaus v.
Commissioner, 99 T.C. 202, 210 (1992). The taxpayer’s entire
course of conduct may establish the requisite fraudulent intent.
Stone v. Commissioner, 56 T.C. 213, 223-224 (1971). Fraudulent
intent may be inferred from various kinds of circumstantial
evidence, or “badges of fraud”, including the consistent
understatement of income, inadequate records, implausible or
inconsistent explanations of behavior, concealing assets, and
failure to cooperate with tax authorities. Bradford v.
Commissioner, 796 F.2d 303, 307 (9th Cir. 1986), affg. T.C. Memo.
1984-601. Dealing in cash is also considered a “badge of fraud”
by the courts because it is indicative of a taxpayer’s attempt to
avoid scrutiny of his finances. See id. at 308. Additional
“badges of fraud” include keeping a double set of books and
handling one’s affairs to avoid making the records usually made
in transactions of the kind. Spies v. United States, 317 U.S.
492, 499 (1943). Evidence of fraud also includes a taxpayer’s
use of a business entity to cloak the personal nature of
expenses. See Romer v. Commissioner, T.C. Memo. 2001-168.
For the reasons stated above, respondent’s burden regarding
the underpayment of tax in support of the fraud penalty has been
met. Petitioners’ consistent failure to report taxable income
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