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Respondent calculated the fraud penalty for Mrs. Lorenz by
applying a 20-percent rate to Mr. and Mrs. Lorenz's total
underpayment for each year.
Petitioners contend that respondent should have computed the
fraud penalty by applying 20 percent of one-half of the total
underpayment for Mrs. Lorenz and 75 percent of one-half of the
total underpayment for the estate of Mr. Lorenz. We disagree.
Section 6663 imposes a 75-percent fraud penalty. Section
6663(b) and (c) provides:
(b) Determination of Portion Attributable to
Fraud.--If the Secretary establishes that any portion
of an underpayment is attributable to fraud, the entire
underpayment shall be treated as attributable to fraud,
except with respect to any portion of the underpayment
which the taxpayer establishes (by a preponderance of
the evidence) is not attributable to fraud.
(c) Special Rule for Joint Returns.--In the case
of a joint return, this section shall not apply with
respect to a spouse unless some part of the
underpayment is due to the fraud of such spouse.
Mr. and Mrs. Lorenz filed joint returns for the years in
issue. Thus, Mrs. Lorenz and the estate of Mr. Lorenz are
jointly and severally liable for the penalty for civil fraud if
respondent establishes that Mrs. Lorenz is liable for the fraud
penalty independent of the liability of the estate of Mr. Lorenz.
See Meier v. Commissioner, 91 T.C. 273, 303 n.34 (1988) (for sec.
6653(b)); Stone v. Commissioner, 56 T.C. 213, 227-228 (1971).
The basis of settlement provides that the civil fraud penalty
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