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We conclude that the $184,630 first withdrawn on June 24,
1983, from the Alpha account for petitioners' personal use and
benefit, is properly treated as constructive dividend income
taxable to petitioners in 1983.
In light of the fact that petitioners did report on their
1983 joint Federal income tax return $21,078 relating to their
personal use of CCMI funds, we conclude, however, that
petitioners are not taxable on the $3,148 relating to the items
purchased for the Oyster Pond Property.
Fraud Addition to Tax
Respondent has the burden of establishing fraud by clear and
convincing evidence. Sec. 7454(a); Rule 142(b); Bradford v.
Commissioner, 796 F.2d 303, 307 (9th Cir. 1986), affg. T.C. Memo.
1984-601. Respondent must prove both that an underpayment in tax
exists and that a portion of the underpayment was due to fraud.
Laurins v. Commissioner, 889 F.2d 910, 913 (9th Cir. 1989), affg.
T.C. Memo. 1987-265; Edelson v. Commissioner, 829 F.2d 828, 832
(9th Cir. 1987), affg. T.C. Memo. 1986-223; King's Court Mobile
Home Park, Inc. v. Commissioner, 98 T.C. 511, 515 (1992); Wenz v.
Commissioner, T.C. Memo. 1995-277.
Respondent has shown that the $184,630 withdrawn from the
Alpha account is taxable to petitioners for 1983 and that the tax
reflected on petitioners' 1983 Federal income tax return was
therefore understated.
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