- 17 -
Section 6663 provides for a penalty equal to 75 percent of
the underpayment of tax attributable to fraud. Sec. 6663(a).
For section 6663 to apply, respondent must show that: (1) An
underpayment of tax exists for the period at issue, and (2) a
portion of the underpayment stems from fraud. Laurins v.
Commissioner, 889 F.2d 910, 913 (9th Cir. 1989), affg. Norman v.
Commissioner, T.C. Memo. 1987-265; Parks v. Commissioner, 94 T.C.
654, 660-661 (1990); Petzoldt v. Commissioner, 92 T.C. 661, 699
(1989). The mere failure to report income generally is not
sufficient to establish fraud. Switzer v. Commissioner, 20 T.C.
759, 765 (1953).
A. Underpayment of Tax
There is no question that petitioners underpaid their tax
due for 1990, given their admission that they did not report
income of $990,000 on their return. Thus, we may proceed with
the second prong of the analysis. See Niedringhaus v.
Commissioner, 99 T.C. 202, 210 (1992).
B. Fraudulent Intent
Fraud is intentional wrongdoing on the part of the taxpayer
with the specific purpose of evading a tax believed to be owing.
Petzoldt v. Commissioner, supra at 698; McGee v. Commissioner, 61
T.C. 249, 256 (1973), affd. 519 F.2d 1121 (5th Cir. 1975). The
existence of fraud is a question of fact to be resolved from the
entire record. King's Court Mobile Home Park, Inc. v.
Commissioner, 98 T.C. 511, 516 (1992); Gajewski v. Commissioner,
Page: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NextLast modified: May 25, 2011