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The final issue is whether Ms. Rhodes6 is liable for fraud
under section 6663(a)7 for the years at issue. Respondent has
the burden of proving by clear and convincing evidence that (1)
Ms. Rhodes underpaid her tax each year at issue, and (2) that
some part of the underpayment is due to fraud. Sec. 6663(a);
Parks v. Commissioner, 94 T.C. 654, 660-661 (1990).
Fraud means actual, intentional wrongdoing, and the intent
required is the specific purpose to evade a tax believed to be
owing. Candela v. United States, 635 F.2d 1272 (7th Cir. 1980);
Stoltzfus v. United States, 398 F.2d 1002, 1004 (3d Cir. 1968);
Mitchell v. Commissioner, 118 F.2d 308 (5th Cir. 1941), revg. 40
6As previously noted, respondent conceded at trial that Mr.
Rhodes was not liable for the sec. 6663(a) penalty for the 2
years at issue.
7Sec. 6663 provides:
SEC. 6663. IMPOSITION OF FRAUD PENALTY
(a) Imposition of Penalty.--If any part of any
underpayment of tax required to be shown on a return
is due to fraud, there shall be added to the tax an
amount equal to 75 percent of the portion of the
underpayment which is attributable to fraud.
(b) Determination of Portion Attributable to
Fraud.--If the Secretary establishes that any
portion of an underpayment is attributable to fraud,
the entire underpayment shall be treated as
attributable to fraud, except with respect to any
portion of the underpayment which the taxpayer
establishes (by a preponderance of the evidence) is
not attributable to fraud.
(c) Special Rule for Joint Returns.--In the case
of a joint return, this section shall not apply with
respect to a spouse unless some part of the
underpayment is due to the fraud of such spouse.
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