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i. Existence of an underpayment
In addition to proving fraudulent intent, respondent bears
the burden of proving, by clear and convincing evidence, that
there is an underpayment. Sec. 7454(a); Rule 142(b); DiLeo v.
Commissioner, supra at 873. Section 6653(c)(1) defines an
underpayment for the purposes of section 6653 as a deficiency as
defined by section 6211. However, as in Franklin v.
Commissioner, T.C. Memo. 1993-184, respondent presented little
evidence at trial and little argument in her brief as to the
existence and amounts of the underpayments.
Respondent did adduce considerable evidence that petitioner
had large, unreported bank deposits in 1986 and 1987. For 1986,
the parties also stipulated that petitioner received income from
wages and interest, which also explained some of the deposits.
Respondent further conceded that transfers and the $200,000 loan
from Safra Bank explained still more of the bank deposits,
because they were not includable in income. Petitioner's own
corroborated explanations for the expenditure of much of the
money that flowed through the three accounts in 1986 accounted
for another portion of the bank deposits as nontaxable income.
Only $99,077.39 of the bank deposits for 1986, along with
stipulated sources of income and deductions, form clear and
convincing evidence of taxable income of $109,656.47, upon which
a deficiency may be calculated.
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