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OPINION
The parties have agreed that petitioner earned income and
incurred deductions for the 1986 through 1991 taxable years. The
only remaining controversy is whether petitioner is liable for
the addition to tax for fraud or, in the alternative, negligence
and failure to file. For 1986 and 1987, section 6653(b)(1)(A)
and for 1988 section 6653(b)(1) provide for an addition to tax in
an amount equal to 75 percent of the underpayment that is
attributable to fraud. For 1986 and 1987, section 6653(b)(1)(B)
provides for an additional amount equal to 50 percent of the
interest due on any part of the underpayment attributable to
fraud. Section 6653(b)(2) provides that if any portion of an
underpayment is due to fraud, the entire underpayment is treated
as fraudulent, unless the taxpayer proves some portion of the
underpayment is not due to fraud.
For 1989, 1990, and 1991, section 6651(f) provides for a
maximum addition to tax of 75 percent if any failure to file is
fraudulent. If the failure to file is not due to reasonable
cause and it is not fraudulent, section 6651(a) provides for a
maximum addition to tax of 25 percent.
The addition to tax in the case of fraud is a civil sanction
provided primarily as a safeguard for the protection of the
revenue and to reimburse the Government for the heavy expense of
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Last modified: May 25, 2011