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These adjustments and corrections resulted in the overassessments
and deficiency reflected in the notice of deficiency issued to
petitioner. In addition, respondent determined that the
difference between the taxes as stated in petitioner's original
Federal income tax returns for 1989, 1990, and 1991, and the
corrected taxes for those years, is subject to the fraud penalty
under section 6663(a). Sec. 1.6664-2(c), Income Tax Regs.
OPINION
The only issue for decision is whether petitioner is liable
for the fraud penalty for each of the years 1989, 1990, and 1991.
Section 6663(a) provides that if any part of any underpayment of
tax required to be shown on a return is due to fraud, there shall
be added to the tax an amount equal to 75 percent of the portion
of the underpayment which is attributable to fraud. In order to
establish petitioner's liability for fraud, respondent bears the
burden of proving by clear and convincing evidence: (1) An
underpayment exists for each of the years in issue; and (2) that
some portion of the underpayment is due to fraud.5 Sec. 7454(a);
5Section 6663(b) provides:
If the Secretary establishes that any portion of an
underpayment is attributable to fraud, the entire
underpayment shall be treated as attributable to fraud,
except with respect to any portion of the underpayment
which the taxpayer establishes (by a preponderance of
the evidence) is not attributable to fraud.
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Last modified: May 25, 2011