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The additions to tax for fraud are civil sanctions "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). Fraud is defined as
intentional wrongdoing on the part of the taxpayer with the
specific purpose of evading a tax believed to be owing. Mitchell
v. Commissioner, 118 F.2d 308, 310 (5th Cir. 1941); Petzoldt v.
Commissioner, 92 T.C. 661, 698 (1989). Section 7454 states in
pertinent part that "In any proceeding involving the issue
whether the petitioner has been guilty of fraud with intent to
evade tax, the burden of proof in respect of such issue shall be
upon the Secretary." Rule 142(b) requires that this burden be
carried by clear and convincing evidence. Castillo v.
Commissioner, 84 T.C. 405, 408 (1985).
Under section 6653(b)(1)(A) for 1987 and section 6653(b)(1)
for 1988, the fraud addition is imposed where there is an
underpayment of tax required to be shown on the return that is
due to fraud. Fraud is shown by proof that the taxpayer intended
to conceal, mislead, or otherwise prevent the collection of his
or her taxes. Spies v. United States, 317 U.S. 492, 499 (1943);
Stoltzfus v. Unites States, 398 F.2d 1002, 1005 (3d Cir. 1968);
Webb v. Commissioner, 394 F.2d 366, 377 (5th Cir. 1968), affd.
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Last modified: May 25, 2011