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Respondent bears the burden of proof on this issue. Sec.
7454(a); Rule 142(b).
For the taxable years 1983 through 1985, if any portion of
an underpayment of tax required to be shown on a return is due to
fraud, there shall be added to the tax an amount equal to 50
percent of the underpayment, as well as an amount equal to 50
percent of the interest payable under section 6601 with respect
to the portion of the underpayment attributable to fraud. Sec.
6653(b)(1) and (2). For the taxable year 1986, the addition to
tax is equal to 75 percent of the portion of any underpayment
attributable to fraud, plus 50 percent of the interest due on
this portion. Sec. 6653(b)(1)(A) and (B). If respondent
establishes that any portion of the underpayment for 1986 is
attributable to fraud, then the entire underpayment is to be
treated as attributable to fraud, except with respect to any
portion of the underpayment that petitioner establishes is not
attributable to fraud. Sec. 6653(b)(2).
In order to discharge her burden, respondent must prove by
clear and convincing evidence that: (1) An underpayment exists
for the years in issue, and (2) some portion of the underpayment
is due to fraud. Sec. 7454(a); Petzoldt v. Commissioner, 92 T.C.
661, 699 (1989). The facts contained in respondent's requests
for admission establish that there was an underpayment of tax for
each of the years in issue in the amounts determined by
respondent.
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