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C. Fraud
Respondent determined that petitioner is liable for fraud
under section 6663. Respondent affirmatively pled fraud and the
facts in support of fraud in the answer. Respondent has the
burden of proving, by clear and convincing evidence, that some
part of the underpayment for the year in issue was due to fraud.
Secs. 6663(b), 7454(a); Rule 142(b). Respondent must establish
that petitioner underpaid tax and that part of the underpayment
was due to fraud. Sec. 6663(b). The deemed admissions under
Rule 37(c) establish that petitioner underpaid tax for 1989 in
the amount determined by respondent. Doncaster v. Commissioner,
supra.
Respondent must prove by clear and convincing evidence that
petitioner had fraudulent intent. Parks v. Commissioner, 94 T.C.
654, 664 (1990). Fraud means actual, intentional wrongdoing,
Mitchell v. Commissioner, 118 F.2d 308, 310 (5th Cir. 1941),
revg. 40 B.T.A. 424 (1939), or the intentional commission of an
act for the specific purpose of evading a tax believed to be
owing, Webb v. Commissioner, 394 F.2d 366, 377 (5th Cir. 1968),
affg. T.C. Memo. 1966-81. The deemed admissions also establish
that petitioner did not report all of his income.
The courts have developed a number of objective indicators
or "badges" of fraud. Recklitis v. Commissioner, 91 T.C. 874,
910 (1988). Several badges of fraud are present in this case:
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