James Alan Price - Page 23

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          section 6653(b)(1)(A) to the portion of the underpayment due to             
          fraud rather than the entire underpayment (as under former                  
          section 6653(b)(1)) and raise the rate from 50 to 75 percent.               
          Tax Reform Act of 1986, Pub. L. 99-514, secs. 1503(a), (c), 100             
          Stat. 2085, 2742-2743; H. Rept. 99-426, 1986-3 C.B. (Vol. 2) 1,             
          834-835.  We must decide whether section 6653(b) as amended in              
          1986 continues to be remedial, or whether it serves punitive                
          goals of deterrence or retribution.  Department of Revenue v.               
          Kurth Ranch, supra; United States v. Halper, supra.                         
               We believe that Congress intended section 6653(b) to                   
          continue to be remedial.  The report of the Ways and Means                  
          Committee for the Tax Reform Act of 1986 explained the changes to           
          the fraud addition to tax in 1986 as follows:                               
                                 Reasons for Change                                   
          *   *   *   *   *   *   *                                                   
                    The committee is also concerned that the current                  
               applicability of the fraud penalty to the entire                       
               underpayment of tax (once the IRS has established fraud                
               with respect to any portion of the underpayment) may                   
               decrease the efficacy of this penalty.  The committee                  
               is concerned that imposing the same penalty on two                     
               taxpayers who have identical underpayments, one                        
               attributable wholly to fraud and the other attributable                
               only in part to fraud, may be an insufficient deterrent                
               to fraudulent behavior.  Consequently, the committee                   
               has narrowed the scope of the fraud penalty so that it                 
               applies only to the portion of the underpayment                        
               attributable to fraud.  The committee has concomitantly                
               increased the level of the penalty.  The committee                     
               believes that these modifications more appropriately                   
               target the fraud penalty to fraudulent behavior.                       
          H. Rept. 99-426, 1986-3 C.B. (Vol. 2) 1, 834.                               




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