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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. However, these “badges of
fraud” are not exclusive. Niedringhaus v. Commissioner, supra at
211; Miller v. Commissioner, 94 T.C. 316, 334 (1990).
Additionally, the taxpayer’s background may be examined to
establish fraud. Spies v. United States, 317 U.S. 492, 497
(1943); Niedringhaus v. Commissioner; supra at 211; Walters v.
Commissioner, T.C. Memo. 1995-543. A consistent pattern of
understating income may be strong evidence of fraud. Delvecchio
v. Commissioner, supra (citing Holland v. United States, 348 U.S.
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