Donald Ferry and Sharon Ferry - Page 16

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            petitioner created or participated in numerous entities, bank                                  
            accounts, transactions among purported partners and shareholders,                              
            and other purported arrangements (such as loans, leases, flow-                                 
            throughs), many of which were fictitious, creating layers of                                   
            complexity which appear to have served little or no function                                   
            other than an attempt to deceive respondent.  Indeed, the web                                  
            woven by petitioner is so tangled as to be virtually                                           
            impenetrable.                                                                                  
            Additions for Fraud                                                                            
                  Respondent determined in the notice of deficiency that                                   
            petitioner is liable for the additions to tax for fraud under                                  
            section 6653(b)(1)(A) and (B) for 1987 and section 6653(b) for                                 
            1988.  Respondent bears the burden of proof and must establish                                 
            each element of fraud by clear and convincing evidence.  Sec.                                  
            7454(a); Rule 142(b); Akland v. Commissioner, 767 F.2d 618, 621                                
            (9th Cir. 1985), affg. T.C. Memo. 1983-249; Toussaint v.                                       
            Commissioner, 743 F.2d 309, 312 (5th Cir. 1984), affg. T.C. Memo.                              
            1984-25; Wright v. Commissioner, 84 T.C. 636, 639 (1985).                                      
            Respondent must prove fraud in each of the years involved.                                     
            Drieborg v. Commissioner, 225 F.2d 216, 220 (6th Cir. 1955),                                   
            affg. in part and revg. in part a Memorandum Opinion of this                                   
            Court dated Feb. 24, 1954.                                                                     
                  Respondent must prove by clear and convincing evidence that:                             
            (1) An underpayment of tax exists for each of the years in issue,                              
            and (2) that some part of the underpayment is due to fraud.  Sec.                              



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