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3. Fraudulent Intent
For purposes of section 6653(b), fraud is the intentional
commission of an act to evade a tax believed to be owing. Webb
v. Commissioner, 394 F.2d 366, 377 (5th Cir. 1968), affg. T.C.
Memo. 1966-81. Fraud is never presumed; it must be established
by affirmative evidence. Beaver v. Commissioner, 55 T.C. 85, 92
(1970).
To establish that petitioner is liable for the fraud penalty
for 1987 and 1988, respondent must show by clear and convincing
evidence that petitioner knew he was taxable in each of those
years on at least some of the funds that he caused NSA to divert
from TCM to Camaro and some of the funds he diverted from TCM to
Double D or to his personal account. To establish that TCM is
liable for the fraud penalty for 1987, respondent must show by
clear and convincing evidence that petitioner, as president and
CEO of TCM, also knew TCM was liable for tax on at least some of
the funds he caused NSA to divert from TCM to Camaro and some of
the funds he diverted from TCM to Double D or to his personal
account.
The Commissioner may prove fraud by circumstantial evidence
because direct evidence of the taxpayer's intent is rarely
available. Stephenson v. Commissioner, 79 T.C. 995, 1005-1006
(1982), affd. 748 F.2d 331 (6th Cir. 1984).
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