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OPINION
Respondent argues that petitioners underreported their
income for 1986 with the intent to evade tax. Petitioners
contend that, although they did deposit and expend large amounts
of cash during 1986, the income that respondent alleges was
unreported was actually cash that petitioners had saved during
previous years.
The addition to tax in the case of fraud is a civil sanction
provided primarily as a safeguard for the protection of the
revenue and to reimburse the Government for the heavy expense of
investigation and for the loss resulting from the taxpayer's
fraud. Helvering v. Mitchell, 303 U.S. 391, 401 (1938).
Respondent has the burden of proving, by clear and convincing
evidence, an underpayment for each year and that some part of an
underpayment for each year was due to fraud. Sec. 7454(a); Rule
142(b). If respondent establishes that any portion of the
underpayment is treated as attributable to fraud, the entire
underpayment is treated as attributable to fraud and subject to
the 75-percent addition to tax unless the taxpayer establishes
that some part of the underpayment is not attributable to fraud.
Sec. 6653(b).
The existence of fraud is a question of fact to be resolved
upon consideration of the entire record. Gajewski v.
Commissioner, 67 T.C. 181, 199 (1976), affd. without published
opinion 578 F.2d 1383 (8th Cir. 1978). Fraud will never be
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Last modified: May 25, 2011