Mark N. Wright and Erica Y. Wright - Page 33

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          Commissioner, 91 T.C. 874, 909 (1988).  Fraud is never presumed             
          and must be established by independent evidence of fraudulent               
          intent.  Petzholdt v. Commissioner, supra at 699; Recklitis v.              
          Commissioner, supra at 909-910.  The taxpayer’s entire course of            
          conduct can be indicative of fraud.  Stone v. Commissioner, 56              
          T.C. 213, 224 (1971).                                                       
               As direct proof of a taxpayer’s intent is seldom available,            
          fraud may be established by circumstantial evidence and                     
          reasonable inferences drawn from the record.  Stoltzfus v. United           
          States, supra at 1005; DiLeo v. Commissioner, supra at 874.                 
          Courts have developed a nonexclusive list of factors, or “badges”           
          of fraud, that support a finding of fraudulent intent.  See Spies           
          v. United States, 317 U.S. 492, 499 (1943); Bradford v.                     
          Commissioner, 796 F.2d 303, 307-308 (9th Cir. 1986), affg. T.C.             
          Memo. 1984-601.  Although no single factor may be necessarily               
          sufficient to establish fraud, the existence of several indicia             
          may be persuasive circumstantial evidence of fraud.  Solomon v.             
          Commissioner, 732 F.2d 1459, 1461 (6th Cir. 1984), affg. T.C.               
          Memo. 1982-603.                                                             
               The “badges” of fraud include:  (1) Understating income;               
          (2) maintaining inadequate records; (3) failing to file tax                 
          returns; (4) providing implausible or inconsistent explanations             
          of behavior; (5) concealing income or assets; (6) failing to                
          cooperate with tax authorities; (7) engaging in illegal                     






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