Willis Clark - Page 12
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caused thereby to respondent cannot be justified. We shall grant
respondent’s motion to dismiss pursuant to Rule 123(b) and shall
enter a decision against petitioner as to the determined
deficiencies for taxable years 1993 and 1994.
II. Fraud Penalties
Section 6663(a) provides for the imposition of a penalty in
“an amount equal to 75 percent of the portion of the underpayment
which is attributable to fraud.” In addition, section 6663(b)
specifies that if any portion of the underpayment is attributable
to fraud, the entire underpayment is treated as attributable
thereto, except and to the extent that the taxpayer establishes
some part is not due to fraud.
Respondent bears the burden of proving the applicability of
the civil fraud penalty by clear and convincing evidence. Sec.
7454(a); Rule 142(b). To sustain this burden, respondent must
establish by this level of proof both (1) that there was an
underpayment of tax for each taxable year at issue and (2) that
at least some portion of such underpayment was due to fraud.
DiLeo v. Commissioner, 96 T.C. 858, 873 (1991), affd. 959 F.2d 16
(2d Cir. 1992); Petzoldt v. Commissioner, 92 T.C. 661, 699
A. Underpayments of Tax
Where allegations of fraud are intertwined with unreported
and indirectly reconstructed income, the Commissioner may satisfy
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