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The addition to tax for fraud is a civil sanction provided
primarily for the protection of the revenue and to reimburse the
Commissioner for the heavy expense of investigation and the loss
resulting from the taxpayer's fraud. Helvering v. Mitchell, 303
U.S. 391, 401 (1938). Fraud is defined as an intentional
wrongdoing designed to evade tax believed to be owing. Powell v.
Granquist, 252 F.2d 56 (9th Cir. 1958); Miller v. Commissioner,
94 T.C. 316, 332 (1990). The Commissioner bears the burden of
demonstrating fraud by clear and convincing evidence. Sec.
7454(a); Rule 142(b). The existence of fraud is a question of
fact to be resolved upon consideration of the entire record.
Korecky v. Commissioner, 781 F.2d 1566, 1568 (11th Cir. 1986),
affg. per curiam T.C. Memo. 1985-63; Gajewski v. Commissioner, 67
T.C. 181, 199 (1976), affd. without published opinion 578 F.2d
1383 (8th Cir. 1978); Estate of Pittard v. Commissioner, 69 T.C.
391 (1977).
In order to carry the burden of proof on the issue of fraud,
respondent must show, for each year in issue, that (1) an
underpayment of tax exists and (2) some portion of the
underpayment is due to fraud. Petzoldt v. Commissioner, 92 T.C.
at 699.
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