- 267 -
This tentative and qualified reaction by the trial Judge was made
before a review of all the testimony and massive documentary
evidence and before any briefs were filed.29
We are not bound by the comments made by the trial Judge
about the fraud issue. They were of a preliminary or tentative
nature, and were not embodied in a ruling. In our view the
totality of the clear and convincing evidence contained in this
record establishes that petitioner's underpayment of tax for each
of the years 1972 through 1976 was due to fraud with intent to
evade tax. In the trial Judge's qualified reaction there was no
analysis of the indicia of fraud present in this record. By
contrast, our conclusion regarding the section 6653(b) additions
to tax is based on consideration of the indicia of fraud
discussed below.
The addition to tax in the case of fraud is a civil sanction
provided primarily as a safeguard for the protection of the
revenue and to reimburse the Government for the heavy expense of
investigation and the loss resulting from the taxpayer's fraud.
Helvering v. Mitchell, 303 U.S. 391, 401 (1938). The
Commissioner bears the burden of proof with respect to the
additions to tax for fraud, and that burden must be carried by
29 Compare North American Rayon Corp. v. Commissioner, 12 F.3d 583, 586
& n. 4 (6th Cir. 1993), affg. T.C. Memo. 1992-610, where the trial Judge wrote
a letter to counsel indicating that the Court was inclined to rule in favor of
the taxpayer, but in a subsequent opinion decided against the taxpayer. The
Court of Appeals affirmed the decision. See also Milbrew, Inc. v.
Commissioner, 710 F.2d 1302, 1308 (7th Cir. 1983), affg. T.C. Memo. 1981-610.
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