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that the entire $37,712 is includable in their gross income as a
capital gain. Sec. 1368(b).
Turning to respondent’s other determination, namely, that
petitioners are liable for fraud, respondent must prove this
determination by clear and convincing evidence. Sec. 7454(a);
Rule 142(b); Rowlee v. Commissioner, 80 T.C. 1111, 1113 (1983).
Fraud requires a showing that the taxpayer intended to evade a
tax known or believed to be owing by conduct intended to conceal,
mislead, or otherwise prevent the collection of tax. Stoltzfus
v. United States, 398 F.2d 1002, 1004 (3d Cir. 1968). Respondent
must prove that: (1) Petitioners underpaid their taxes for the
relevant years, and (2) some part of each underpayment was due to
fraud. Because respondent bears the burden of proving fraud, we
may not and shall not bootstrap any part of our fraud
determination upon petitioners’ failure to prove respondent's
deficiency determination erroneous. Parks v. Commissioner,
94 T.C. 654, 660-661 (1990).
On the basis of on our review of the record, we conclude
that respondent has proven the first prong of the two-part test.
Petitioners amended their personal income tax returns for each of
the subject years to report additional income. Petitioners’
amended returns are admissions of Federal income tax
underpayments. Badaracco v. Commissioner, 464 U.S. 386, 399
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