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years, respondent must separately prove fraud for each year.
Drieborg v. Commissioner, 225 F.2d 216, 219-220 (6th Cir. 1955).
I. Underpayment
To establish that Door Control is liable for the additions
to tax for fraud, respondent must prove by clear and convincing
evidence that Door Control underpaid taxes relating to 1985,
1986, 1987, and 1988.
On its 1985 return, Door Control claimed a deduction for a
net operating loss carryback from 1988. In 1988, Door Control
reported a $22,932 loss. After adjusting Door Control's 1988
income (i.e., adding $105,891.87 Door Control failed to report),
the corporation did not have a loss in 1988. As a result, Door
Control was not entitled to a net operating loss carryback in
1985, and respondent has established an underpayment relating to
Door Control's 1985 return.
With respect to the 1986, 1987, and 1988 corporate returns,
Door Control understated its taxable income by failing to report
corporate income of $94,983.42 in 1986, $66,173.01 in 1987, and
$105,891.87 in 1988. In addition, Door Control claimed over
$30,000 in deductions in 1986, 1987, and 1988 for nondeductible
expenditures made for the personal benefit of the Gilchrists.
Consequently, respondent has established that Door Control
underpaid its taxes relating to 1986, 1987, and 1988.
To establish that the Gilchrists are liable for the
additions to tax for fraud, respondent must prove by clear and
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