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Respondent has the burden of proving fraud by clear and
convincing evidence. Sec. 7454(a); Rule 142(b). To prove that a
taxpayer fraudulently underpaid a dollar of tax, respondent must
prove both the fact of the underpayment and fraudulent intent
with respect thereto. See, e.g., Recklitis v. Commissioner,
91 T.C. 874, 909 (1988). “Fraud is established by proving that
the taxpayer intended to evade tax believed to be owing by
conduct intended to conceal, mislead, or otherwise prevent the
collection of such tax.” Id.
We have found that, based on the plea agreement and the
statement of facts, petitioner received proceeds from illegal
drug activities, which proceeds were not reported as income for
the years in question, and sustained respondent's determination
of deficiencies against petitioner (with one adjustment). We
believe that the evidence in this case clearly and convincingly
supports findings of underpayments in equal amounts. See sec.
6653(c)(1). Thus, the sole issue remaining for consideration in
determining the applicability of the additions to tax for fraud
is whether petitioner acted willfully to evade taxes known to be
owing. We believe that he did, for each year, with respect to
the totality of that year’s underpayment.
Petitioner filed income tax returns for the years in
question, establishing that he understood his obligation to file
returns and pay tax. Petitioner’s failure to report substantial
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