- 21 -
that petitioners were not entitled to exercise control over the
sales proceeds and Clack Bros. was obligated to use the sales
proceeds to acquire replacement property designated by
petitioners, we do not find the agreement with Clack Bros. to be
a sufficient basis for finding a restriction on petitioners'
ability to use the proceeds of sale.
Petitioners, as a guise, named 10 properties within the 45-
day period with no apparent intention to use them as replacement
properties. When the replacement properties suitable to
petitioners were designated (after the 45-day period),
petitioners, with Clack's cooperation and participation,
backdated documents to make it appear that the properties had
been timely identified. In this setting, we hold that
petitioners have failed to show that any restriction on their
ability to use the proceeds was sufficient to avoid constructive
receipt in 1989. Accordingly, petitioners are not entitled to
installment reporting into the 1990 taxable year.
Fraud Penalty
Section 6663(a) imposes a penalty equal to 75 percent of any
underpayment that is due to fraud. Fraud is defined as an
intentional wrongdoing designed to evade tax believed to be
owing. Edelson v. Commissioner, 829 F.2d 828, 833 (9th Cir.
1987), affg. T.C. Memo. 1986-223; Bradford v. Commissioner, 796
F.2d 303, 307 (9th Cir. 1986), affg. T.C. Memo. 1984-601.
Respondent has the burden of proving fraud by clear and
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