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Upon consideration of the record, we conclude the method
used by respondent to determine petitioner's unreported tip
income was reasonable. Thus, petitioner has failed to satisfy
her burden of proving error in respondent's determination of her
1989 and 1990 tip income. Rule 142(a); Welch v. Helvering, 290
U.S. 111, 115 (1933). Accordingly, we sustain those
determinations.
We next turn to the question of whether petitioner is liable
for fraud penalties under section 6663(a) for both 1989 and 1990.
Respondent must prove by clear and convincing evidence that
petitioner is liable for the fraud penalty. Sec. 7454(a); Rule
142(b). Respondent must meet her burden of proving fraud through
affirmative evidence; fraud is never imputed or presumed. Beaver
v. Commissioner, 55 T.C. 85, 92 (1970). Whether fraud exists in
a given situation is a factual determination that must be made
after reviewing the particular facts and circumstances of the
case. DiLeo v. Commissioner, 96 T.C. 858, 874 (1991), affd. 959
F.2d 16 (2d Cir. 1992). Respondent must show clearly that
petitioner intended to evade a tax known or believed to be owing.
Stoltzfus v. United States, 398 F.2d 1002, 1004 (3d Cir. 1968).
Fraud cannot be found if the circumstances only create a
suspicion of its existence. Petzoldt v. Commissioner, 92 T.C.
661, 700 (1989). The mere failure to report income is not
sufficient to establish fraud. Petzoldt v. Commissioner, supra.
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