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larger than that allowed by respondent. At trial, petitioner
offered oral testimony unsubstantiated by documentary evidence to
demonstrate additional costs. See Hradesky v. Commissioner, 65
T.C. 87, 90 (1975), affd. 540 F.2d 821 (5th Cir. 1976). Even the
oral testimony was not specific in identifying additional
amounts. On brief, petitioners argue that Pascual miscalculated
amounts for all 3 years and that petitioners owe no tax. The
calculations provided in petitioners’ brief are not supported by
evidence in the record. Petitioner’s claim that he had no
taxable income is not credible in the circumstances. He is
entitled to no costs of goods sold or deductions beyond those
conceded by respondent.
Fraud Penalty
The penalty 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 the loss resulting from the taxpayer’s fraud.
Helvering v. Mitchell, 303 U.S. 391, 401 (1938); Sadler v.
Commissioner, 113 T.C. 99, 102 (1999). Respondent has the burden
of proving, by clear and convincing evidence, an underpayment for
the years in issue and that some part of the underpayment for
those years was due to fraud. Sec. 7454(a); Rule 142(b). If
respondent establishes that any portion of the underpayment is
attributable to fraud, the entire underpayment is treated as
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