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facts relating to his examination of petitioners' returns for the
years at issue, including what Mr. Dennett, who unfortunately
died prior to trial, told him during the course of that examina-
tion.
Issues on Which Respondent Has the Burden of
Proof--Additions to Tax Under Section 6653(b)(1)
For 1986 and 1987, section 6653(b)(1)(A) imposes an addition
to tax equal to 75 percent of the portion of an underpayment that
is attributable to fraud, and section 6653(b)(1)(B) imposes an
addition to tax equal to 50 percent of the interest due on that
portion of the underpayment. For 1988, section 6653(b)(1)
imposes an addition to tax equal to 75 percent of the portion of
the underpayment attributable to fraud. For purposes of the
foregoing provisions, section 6653(b)(2) provides that if respon-
dent establishes that any portion of an underpayment is due to
fraud, the entire underpayment is treated as attributable to
fraud, unless the taxpayer proves that some portion of the
underpayment is not due to fraud.
In order for the additions to tax for fraud to be imposed,
respondent must prove by clear and convincing evidence that an
underpayment exists and that some portion of that underpayment is
due to fraud. Sec. 7454(a); Rule 142(b); Niedringhaus v. Commis-
sioner, 99 T.C. 202, 210 (1992). Petitioners concede the under-
payment determined by respondent for each of the years at issue
except for that portion of the underpayment for 1988 that is
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