- 36 -
For the 2 tax years at issue, the fraud additions under
6653(b)(1) are two-fold. First, a taxpayer is liable for 75
percent of the underpayment attributable to fraud. Sec.
6653(b)(1)(A). However, that effectively means that the taxpayer
who fails to show that part of the underpayment is not
attributable to fraud can be liable for 75 percent of the entire
underpayment. Sec. 6653(b)(2). Second, section 6653(b)(1)(B)
calls for an addition equal to 50 percent of the interest payable
on that underpayment under section 6601(a).
Section 6653(b)(1) requires the presence of two elements for
a finding of civil tax fraud: underpayment of tax and fraudulent
intent. Respondent bears the burden of proof on the issue of
existence of fraud, sec. 7454(a); Rule 142(b), and can meet that
burden by presenting a prima facie case of clear and convincing
evidence. DiLeo v. Commissioner, 96 T.C. 858, 873 (1991), affd.
on other issues 959 F.2d 16 (2d Cir. 1992); Smith v.
Commissioner, 91 T.C. 1049, 1053 n.3 (1988) (citing Rickard v.
Commissioner, 15 B.T.A. 316, 317 (1929)), affd. 926 F.2d 1470
(6th Cir. 1991); see also Manton v. Commissioner, a Memorandum
Opinion of this Court dated Nov. 22, 1948. The existence of
fraud is a question of fact that we must resolve separately for
each year upon considering the entire record. Recklitis v.
Commissioner, 91 T.C. 874, 909 (1988); Teitelbaum v.
Commissioner, 294 F.2d 541, 547 (7th Cir. 1961), affg. T.C. Memo.
1960-11.
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