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Respondent determined that the deficiencies for 1984, 1985,
1986, and 1987 were attributable to fraud. Respondent must prove
her determinations of fraud by clear and convincing evidence.
Sec. 7454(a); Rule 142(b); Rowlee v. Commissioner, 80 T.C. 1111,
1123 (1983). Fraud requires a showing that the taxpayer intended
to evade a tax known or believed to be owing. Stoltzfus v.
United States, 398 F.2d 1002, 1004 (3d Cir. 1968). In order to
carry the burden of proof on the issue of fraud, respondent must
prove that: (1) Petitioner underpaid his tax in each year and
(2) some part of each underpayment was due to fraud. See Lee v.
Commissioner, T.C. Memo. 1995-597. With respect to section
6653(b)(1)(A) and (B), applicable to petitioner's 1986 and 1987
taxable years, if respondent establishes that some part of
petitioner's underpayment was due to fraud, the entire
underpayment is treated as attributable to fraud unless
petitioner proves otherwise. Sec. 6653(b)(2). With respect to
section 6653(b)(2), applicable to petitioner's 1984 and 1985
taxable years, respondent must prove the portion of the
deficiency that is attributable to fraud. Sec. 6653(b)(2);
Franklin v. Commissioner, T.C. Memo. 1993-184.
1. Underpayment
Based on our careful review of the record, we find that
respondent has clearly and convincingly proven that petitioner
underpaid his taxes for 1984, 1985, 1986, and 1987. The record
clearly convinces us that petitioner had significant amounts of
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