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or not the sale to JSL was completed. Additionally, the sale of
ACT's assets to JSL did not constitute a sale of ACT's sole asset
because ACT still had outstanding contracts.
Respondent has proven by clear and convincing evidence that
ACT had not adopted an informal plan of liquidation as required
by section 337. Petitioner has admitted that the minutes that
were provided to the IRS with ACT's 1988 Form 1120 tax return
were false because they were created after the sale, backdated,
and documented a meeting that did not occur.
Because neither a formal nor an informal plan of liquidation
existed prior to or on the sale date of the ACT assets to JSL,
ACT is ineligible for the nonrecognition provisions of section
337; therefore, ACT must recognize gain on the sale of its assets
to JSL.
Additions to Tax
The addition to tax 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). In addition to
proving an underpayment, as discussed above, respondent must
prove that petitioner failed to report the gain on the sale of
its assets with the intent to conceal, mislead, or otherwise
prevent the collection of tax. See Stoltzfus v. United States,
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