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The addition to tax and penalty in the case of 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 for the loss resulting from
the taxpayer's fraud. Helvering v. Mitchell, 303 U.S. 391, 401
(1938). Respondent has the burden of proving, by clear and
convincing evidence, an underpayment for each year and that some
part of an underpayment for each year was due to fraud. Sec.
7454(a); Rule 142(b). If respondent establishes that any portion
of the underpayment is treated as attributable to fraud, the
entire underpayment is treated as attributable to fraud and
subject to the 75-percent addition to tax or penalty unless the
taxpayer establishes that some part of the underpayment is not
attributable to fraud. Secs. 6653(b), 6663(b). This burden is
met if it is shown that the taxpayer intended to conceal,
mislead, or otherwise prevent the collection of such taxes.
Stoltzfus v. United States, 398 F.2d 1002, 1004 (3d Cir. 1968);
Webb v. Commissioner, 394 F.2d 366, 377 (5th Cir. 1968), affg.
T.C. Memo. 1966-81.
The existence of fraud is a question of fact to be resolved
upon consideration of the entire record. Gajewski v.
Commissioner, 67 T.C. 181, 199 (1976), affd. without published
opinion 578 F.2d 1383 (8th Cir. 1978). Fraud will never be
presumed. Beaver v. Commissioner, 55 T.C. 85, 92 (1970). Fraud
may, however, be proved by circumstantial evidence because direct
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Last modified: May 25, 2011