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tax law. Petitioner's testimony was vague, and he remembered few
specifics surrounding the surrender agreement, the sublease
agreement, and the meetings with Signorile. Petitioner could not
remember signing the surrender agreement. We also give less
weight to petitioner's testimony because of his prior efforts to
mislead Sotiriou and Signorile.
Considering the record taken as a whole and reasonable
inferences therefrom, we conclude that petitioner intended to
evade taxes known to be owing by conduct intended to conceal,
mislead, or otherwise prevent the collection of taxes, and that
the portion of the underpayment for the taxable year 1989
attributable to the $322,500 paid by Seawall pursuant to the
surrender agreement is attributable to fraud. Respondent has
conceded that the underpayment of tax attributable to the rent-
free use of the new apartment is not attributable to fraud.
Respondent determined that petitioners are liable for a
penalty under section 6662(a) for any portion of the underpayment
for the taxable year 1989 not attributable to fraud, and for the
entire underpayments for the taxable years 1990 and 1991.
Section 6662(a) imposes a penalty equal to 20 percent of the
portion of the underpayment that is attributable to negligence.
We have held that the underpayment attributable to the
unreported $322,500 is attributable to petitioner's fraud. This
holding makes moot respondent's alternative determination as to
petitioners pursuant to section 6662 that the underpayment of tax
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