- 21 -
peril." United States v. Mastropieri, supra at 785 (quoting
Holland v. United States, supra at 139). We conclude that
respondent's agents conducted a reasonable investigation of leads
to possible sources of nontaxable income.
We conclude that respondent's net worth computations meet
the standards set forth in Holland v. United States, supra, and
United States v. Massei, supra. We conclude that petitioners had
unreported income of $105,205.26 in 1984, $70,214.39 in 1985, and
$31,204.29 in 1986.
We now turn to respondent's fraud determinations.
Fraud
The Commissioner has the burden of proving fraud by clear
and convincing evidence. Sec. 7454(a); Rule 142(b). First, the
Commissioner must prove the existence of an underpayment. Parks
v. Commissioner, 94 T.C. 654, 660 (1990). The Commissioner may
not rely upon the taxpayer's failure to carry the burden of proof
as to the underlying deficiency. Id. at 660-661; Petzoldt v.
Commissioner, 92 T.C. 661, 700 (1989); Estate of Beck v.
Commissioner, 56 T.C. 297, 363 (1971). Second, the Commissioner
must show that the taxpayer intended to evade taxes by conduct
intended to conceal, mislead, or otherwise prevent tax
collection. Stoltzfus v. United States, 398 F.2d 1002, 1004 (3d
Cir. 1968); Parks v. Commissioner, supra at 661; Rowlee v.
Commissioner, 80 T.C. 1111, 1123 (1983). Petitioner's conviction
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