C. Richard Roose, Jr. and Betty B. Roose - Page 9

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                    (2) 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 is not attributable to                  
               Respondent's burden with respect to fraudulent intent is met           
          if it is shown that the taxpayer intended to conceal, mislead, or           
          otherwise prevent the collection of such taxes.  Stoltzfus v.               
          United States, 398 F.2d 1002, 1004 (3d Cir. 1968); Webb v.                  
          Commissioner, 394 F.2d 366, 377 (5th Cir. 1968), affg. T.C. Memo.           
          1966-81.  The existence of fraud is a question of fact to be                
          resolved upon consideration of the entire record.  Gajewski v.              
          Commissioner, 67 T.C. 181, 199 (1976), affd. without published              
          opinion 578 F.2d 1383 (8th Cir. 1978).  Fraud will never be                 
          presumed.  Beaver v. Commissioner, 55 T.C. 85, 92 (1970).  Fraud            
          may, however, be proved by circumstantial evidence because direct           
          proof of the taxpayer's intent is rarely available.  The                    
          taxpayer's entire course of conduct may establish the requisite             
          fraudulent intent.  Stone v. Commissioner, 56 T.C. 213, 223-224             
          (1971); Otsuki v. Commissioner, 53 T.C. 96, 105-106 (1969).                 
               Petitioners contend that respondent has failed to prove                
          fraud.  Petitioners argue that they maintained adequate records             
          and provided those records in the form of the Drug Topics book to           
          Reed, their accountant, for each of the years in issue.                     
          Petitioners attempt to blame Reed for their underreporting of               
          income.  They argue that Reed should have asked for supporting              

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