- 24 -
Petitioner claimed $6,406 of child care costs as a business
expense on his Schedule C for 1990. Petitioner claimed expenses
for medical malpractice insurance when in fact he did not carry
such insurance. Petitioner also dealt in cash.
After reviewing all of the facts and circumstances, we
conclude that respondent has clearly and convincingly proven that
a portion of petitioner's underpayments of tax for 1988, 1989,
and 1990 was due to fraud on the part of petitioner.
Once the Commissioner establishes that a portion of the
underpayment is attributable to fraud, the entire underpayment is
treated as attributable to fraud except for any portion of the
underpayment which the taxpayer establishes is not attributable
to fraud. Secs. 6653(b)(2), 6663(b).
We find that the portion of each underpayment attributable
to petitioner's claiming COGS for his real estate activity is not
due to fraud. Petitioner believed that his real estate activity
was a trade or business. Furthermore, petitioner disclosed on
his 1988, 1989, and 1990 Schedules C that his principal business
or profession was "Med. Doctor & Home Construction Co", "Medicing
[sic] & Construction", and, "Med. Doctor & Contractor",
respectively. Combining his medical practice gross receipts and
real estate activity COGS on one Schedule C appears to have been
a mistake by petitioner and was not due to fraud.
We conclude, therefore, that petitioner is liable for an
addition to tax for fraud pursuant to section 6653(b)(1) for
Page: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 NextLast modified: May 25, 2011