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will be asserted in full against the estate of Mr. Lorenz and
that Mrs. Lorenz is liable for a reduced fraud penalty at an
amount of 20 percent. By agreeing that the fraud penalty applies
both to Mrs. Lorenz and to the estate of Mr. Lorenz, they have
each conceded that a part of their underpayment is due to fraud.
Therefore, liability for the fraud penalty is joint and several
because part of the underpayment is due to the fraud of each
spouse. Sec. 6663(c); Meier v. Commissioner, supra.
The parties agreed to a reduced rate for the fraud penalty
for Mrs. Lorenz, but did not reduce the base to which the penalty
applies for either petitioner. It follows that respondent
properly calculated the fraud penalty for the estate of Mr.
Lorenz by applying the 75-percent rate to Mr. and Mrs. Lorenz's
total underpayment for each year in issue and for Mrs. Lorenz by
applying a 20-percent rate to Mr. and Mrs. Lorenz's total
underpayment for each year.
2. Petitioners' Arguments
Petitioners contend that (a) the parties had previously
orally agreed to apply the fraud penalty separately to the estate
of Mr. Lorenz and Mrs. Lorenz based on only one-half of the
underpayment, and the failure of the basis of settlement to so
provide was a mutual mistake; (b) respondent's counsel knew that
the estate could pay the difference between the 20 percent and
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