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Commissioner, 67 T.C. 181, 199 (1976), affd. without published
opinion 578 F.2d 1383 (8th Cir. 1978). Respondent's burden is
met if she shows that petitioners intended to evade taxes known
to be owing by conduct intended to conceal income, mislead, or
otherwise prevent the collection of taxes. Stoltzfus v. United
States, 398 F.2d 1002, 1004 (3d. Cir. 1968); Rowlee v.
Commissioner, 80 T.C. 1111, 1123, (1983). Respondent must meet
this burden through affirmative evidence because fraud is never
imputed or presumed. Toussaint v. Commissioner, 743 F.2d. 309,
312 (5th Cir. 1984), affg. T.C. Memo. 1984-25; Beaver v.
Commissioner, 55 T.C. 85, 92 (1970). Petitioners' entire course
of conduct can be indicative of fraud. Stone v. Commissioner, 56
T.C. 213, 224 (1971); Otsuki v. Commissioner, supra at 105-106.
A. Underpayment of Tax
Even if all of petitioners' arguments regarding additional
unclaimed deductions and alleged loans were accepted, there would
still be an underreporting of income in 1990 and 1991. This
underreporting would give rise to an underpayment of tax for both
1990 and 1991. Therefore, we next consider whether respondent
has shown an underpayment for 1989 as well.
The Commissioner can satisfy her burden of proving the first
prong of the fraud test; i.e., an underpayment, when the
allegations of fraud are intertwined with unreported and
reconstructed income in one of two ways. The Commissioner may
prove an underpayment by proving a likely source of the
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