George and Myrsini Stotis - Page 13

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          portion of the underpayment is not due to fraud.  Respondent                
          concedes that Myrsini Stotis is not liable for the penalty for              
          fraud.                                                                      
               The Commissioner has the burden of proving fraud by clear              
          and convincing evidence.  Sec. 7454(a); Rule 142(b).  First, the            
          Commissioner must prove the existence of an underpayment.  Parks            
          v. Commissioner, 94 T.C. 654, 660 (1990).  The Commissioner may             
          not rely upon the taxpayer's failure to carry the burden of proof           
          as to the underlying deficiency.  Id. at 660-661; Petzoldt v.               
          Commissioner, 92 T.C. 661, 700 (1989); Estate of Beck v.                    
          Commissioner, 56 T.C. 297, 363 (1971).  Second, the Commissioner            
          must show that the taxpayer intended to evade taxes by conduct              
          intended to conceal, mislead, or otherwise prevent tax                      
          collection.  Stoltzfus v. United States, 398 F.2d 1002, 1004 (3d            
          Cir. 1968); Parks v. Commissioner, supra at 661; Rowlee v.                  
          Commissioner, 80 T.C. 1111, 1123 (1983).                                    
               For the reasons discussed above, we find that respondent has           
          established substantial amounts of unreported income and                    
          consequent underpayment of tax for 1989.                                    
               Respondent must prove by clear and convincing evidence that            
          petitioner had fraudulent intent.  Parks v. Commissioner, supra             
          at 664.  Fraud may be proven by circumstantial evidence.                    
          Stephenson v. Commissioner, 79 T.C. 995, 1005-1006 (1982), affd.            
          748 F.2d 331 (6th Cir. 1984).  A taxpayer's entire course of                
          conduct may establish the requisite fraudulent intent.  Stone v.            




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