Edward A. Wagner - Page 11

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          others to commit the crime of aiding and assisting in the                   
          preparation of false returns of others; the conviction under                
          section 7206(1) might have been with respect to unreported income           
          from movie deals, which respondent has conceded petitioner did              
          not have; further, the convictions under section 7206(1) and (2)            
          could be based on nothing more than petitioner's participation in           
          the conspiracy, under Pinkerton v. United States, 328 U.S. 640,             
          645-647 (1946).                                                             
               Respondent determined that petitioner was liable for an                
          addition to tax for fraud for 1975 under section 6653(b).  This             
          section imposes an addition to tax equal to 50 percent of any               
          underpayment in tax if any part of the underpayment is due to               
          fraud.  To establish this, respondent must show both:  (1) That             
          the taxpayer has underpaid his taxes for the year in question               
          (existence of underpayment), and (2) that some part of the                  
          underpayment is due to fraud (fraudulent intent, intent to evade            
          tax).  DiLeo v. Commissioner, 96 T.C. 858, 873 (1991), affd. on             
          other issues 959 F.2d 16 (2d Cir. 1992); Parks v. Commissioner,             
          94 T.C. 654, 660-661 (1990); Truesdell v. Commissioner, 89 T.C.             
          1280, 1301 (1987); Hebrank v. Commissioner, 81 T.C. 640, 642                
          (1983).  Respondent bears the burden of proving fraud and must              
          carry this burden for each element of fraud by clear and                    
          convincing evidence.  Sec. 7454(a); Rule 142(b); DiLeo v.                   

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