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The additions to tax for fraud are civil sanctions "provided
primarily as a safeguard for the protection of the revenue and to
reimburse the Government for the heavy expense of investigation
and the loss resulting from the taxpayer's fraud." Helvering v.
Mitchell, 303 U.S. 391, 401 (1938). Fraud is defined as
intentional wrongdoing on the part of the taxpayer with the
specific purpose of evading a tax believed to be owing. Miller
v. Commissioner, 94 T.C. 316, 332 (1990); Petzoldt v.
Commissioner, 92 T.C. 661, 698 (1989). Section 7454 provides in
pertinent part that "In any proceeding involving the issue
whether the petitioner has been guilty of fraud with intent to
evade tax, the burden of proof in respect of such issue shall be
upon the Secretary." Furthermore, Rule 142(b) requires that this
burden be carried by clear and convincing evidence. Castillo v.
Commissioner, 84 T.C. 405, 408 (1985).
Under section 6653(b)(1), the fraud addition is imposed
where there is an underpayment of tax required to be shown on the
return that is due to fraud. Once an underpayment of tax has
been established, fraud is shown by proof that the taxpayer
intended to conceal, mislead, or otherwise prevent the collection
of his or her taxes. Spies v. United States, 317 U.S. 492, 499
(1943); Douge v. Commissioner, 899 F.2d 164, 168 (2d Cir. 1990);
Stoltzfus v. United States, 398 F.2d 1002, 1004 (3d Cir. 1968);
Rowlee v. Commissioner, 80 T.C. 1111, 1123 (1983). Under section
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Last modified: May 25, 2011