Frederick M. Fox - Page 11

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               Respondent has the burden of proving, by clear and                     
          convincing evidence, that some part of an underpayment for each             
          year was due to fraud.6  Sec. 7454(a); Rule 142(b).  Respondent's           
          burden with respect to fraudulent intent is met if it is shown              
          that the taxpayer intended to evade taxes known to be owing by              
          conduct 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.  Fraud is not                
          presumed.  Beaver v. Commissioner, 55 T.C. 85, 92 (1970).                   
          However, fraud may be proved by circumstantial evidence because             
          direct proof of the taxpayer's intent is rarely available.                  
          Stephenson v. Commissioner, 79 T.C. 995, 1005-1006 (1982), affd.            
          748 F.2d 331 (6th Cir. 1984).  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).                                   
               Fraudulent intent may be inferred from various kinds of                
          circumstantial evidence or "badges of fraud", including                     


          6  For the taxable years 1983, 1984, and 1985 respondent                    
          must prove the specific portion of the underpayment of tax                  
          attributable to fraud for purposes of establishing the addition             
          to tax under sec. 6653(b)(2).  However, for the taxable years               
          1986 and 1987, sec. 6653(b)(2) provides that, if respondent                 
          establishes that any portion of an underpayment is attributable             
          to fraud, the entire underpayment shall be treated as                       
          attributable to fraud unless the taxpayer shows that some portion           
          of the underpayment is not attributable to fraud.                           




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