- 17 -
value, was its customer list. Accordingly, the contribution of
the remaining shell, after removal of the customer list, was a
mere gesture without substance.
Petitioner's and Roy's promise to pay some or all of the
proceeds from the receipts due to use of the customer lists is
but a promise and does not constitute an event for which a
deduction is allowable. The Mid-Continent corporations were
controlled by petitioner and Roy. Moreover, petitioner has not
shown that payments were made to the Mid-Continent corporations
that would entitle petitioners to a deduction for repayment of
reimbursed preincorporation expenses for their 1983 taxable year.
Accordingly, petitioners are not entitled to any part of the
$90,000 claimed and disallowed by respondent. In addition,
because we have found that no value was in fact transferred to
the Mid-Continent corporations in the form of Riley, petitioners
are not required to report the short-term capital gain
attributable to that transaction.
Additions to Tax for Fraud--Respondent determined that
underpayments on petitioners' returns for 1980, 1981, 1982, and
1983 were due to fraud within the meaning of section 6653(b).
Fraud is defined as an intentional wrongdoing designed to evade
tax believed to be owing. Miller v. Commissioner, 94 T.C. 316,
332 (1990) (citing Powell v. Granquist, 252 F.2d 56 (9th Cir.
1958)). Respondent has the burden of proving, by clear and
convincing evidence, that an underpayment exists for each of the
years at issue, and that some portion of the underpayment is due
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