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On July 29, 1991, respondent’s notices of deficiency for
1984, 1985, and 1987 were mailed to petitioner; in the notice for
1987 $108,037 of claimed legal expenses was disallowed.
In respondent’s notice of deficiency for 1984 and 1985,
respondent also determined that the underpayments of tax were due
to fraud without which respondent’s assessment of deficiencies
for 1984 and 1985 would be barred by the period of limitations
under section 6501.
For 1987, respondent also determined that the underpayment
was due to fraud or, in the alternative, negligence.
Further, for 1987, respondent determined additions to tax
for substantial understatement and failure to timely file.
OPINION
Fraud for 1984, 1985, and 1987
Respondent bears the burden of proving fraud by clear and
convincing evidence. Sec. 7454(a); Rule 142(b); Korecky v.
Commissioner, 781 F.2d 1566, 1568 (11th Cir. 1986), affg. T.C.
Memo. 1985-63; Clayton v. Commissioner, 102 T.C. 632, 646 (1994).
To establish fraud, respondent must prove for each year:
(1) That a taxpayer’s Federal income tax return, as filed,
reflected an underpayment of tax, and (2) that some part of the
underpayment was due to fraudulent intent. Sec. 7454(a); Rule
142(b); Clayton v. Commissioner, supra at 646; Recklitis v.
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