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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
fraud.
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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