- 27 - during the period in question. The outcome of that case, along with the holdings herein regarding the amount of unreported income, will dictate the amount of McDonald’s taxable Social Security benefits. Fraud Penalty--Respondent determined, pursuant to section 6663, that each petitioner is liable for a fraud penalty with respect to the entire income tax deficiency determined for their respective 1989 tax years. Section 6663(a) imposes a 75-percent addition to tax on any portion of an underpayment attributable to fraud. Under section 6663(b), if the Commissioner establishes that any portion of an underpayment is attributable to fraud, then the entire underpayment is treated as attributable to fraud, except to the extent that a taxpayer can establish by a preponderance of the evidence that any portion of the underpayment is not due to fraud. Respondent has the burden of proving, by clear and convincing evidence, that each petitioner fraudulently intended to evade his tax. Sec. 7454(a); Rule 142(b). To meet this burden, respondent must show that there was intent to evade taxes known to be owing by conduct intended to mislead, conceal, or prevent tax collection. Rowlee v. Commissioner, 80 T.C. 1111, 1123 (1983). Respondent must also show (1) that there is an underpayment of tax, and (2) that part of such underpayment is due to fraud. Hebrank v. Commissioner, 81 T.C. 640, 642 (1983). Based on our holdings regarding respondent’s reconstruction of partnership income, miscellaneous items of income, and severalPage: Previous 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Next
Last modified: May 25, 2011