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Issue 2: 1984--Section 6653(b)(1) and (2)
A. Section 6653(b)(1). Because there was no conviction or
admission for 1984, respondent must prove fraud in order to
sustain the addition to tax for fraud under section 6653(b)(1).
See Drieborg v. Commissioner, 225 F.2d at 219-220 (holding that
the Commissioner's proof of fraud for one year will not sustain
the Commissioner's burden for another year). The F&M and W&Y
transactions are subject to the same analysis for this addition
and year as they are for the 6653(b)(2) addition for 1983. For
the reasons set out supra pp. 14-16 with respect to 1983, we find
that respondent has failed to carry her burden of proving an
underpayment concerning the F&M and W&Y transactions for 1984.
The final items for 1984 are the checks that Walter Capital
made to the order of Joe Bass. These transactions are subject to
traditional analysis used to determine whether there is income:
did petitioner receive the funds so as to have an accession to
wealth, Commissioner v. Glenshaw Glass Co., 348 U.S. 426 (1955),
or did petitioner earn the fees, Lucas v. Earl, 281 U.S. 111
(1930)?
Although respondent has presented a stronger case on these
transactions than she did on the alleged embezzlement
transactions, she has failed to prove by clear and convincing
evidence that petitioner received the Walter Capital payments.
Respondent put all her effort at trial into trying to show that
the Joe Bass bank account was petitioner's nominee account.
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