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To the contrary, petitioners assert that they are not liable for
the penalties.
A. Fraud Generally
Under section 6663(a), if any part of any underpayment of
tax is due to fraud, a 75-percent penalty is added to the portion
of the underpayment attributable to fraud. Respondent has the
burden of proving that some portion of an underpayment is
attributable to fraud by clear and convincing evidence. Sec.
7454(a); Rule 142(b); Castillo v. Commissioner, 84 T.C. 405, 408
(1985); Stone v. Commissioner, 56 T.C. 213, 220 (1971). However,
once respondent establishes that any portion of the underpayment
is attributable to fraud, the entire underpayment is treated as
attributable to fraud, unless the taxpayer establishes otherwise.
Sec. 6663(b).
To meet the burden of proof, respondent must establish: (1)
That the taxpayer has underpaid his or her taxes for each year;
Parks v. Commissioner, 94 T.C. 654, 660 (1990); Otsuki v.
Commissioner, 53 T.C. 96, 105 (1969); and (2) that some part of
the underpayment was due to the taxpayer's intent to conceal,
mislead, or otherwise prevent the collection of such taxes. Sec.
6653(b); Scallen v. Commissioner, 877 F.2d 1364, 1369 (8th Cir.
1989), affg. T.C. Memo. 1987-412; Stoltzfus v. United States, 398
F.2d 1002, 1004 (3d Cir. 1968); Parks v. Commissioner, supra at
660-661; Hebrank v. Commissioner, 81 T.C. 640, 642 (1983); Rowlee
v. Commissioner, 80 T.C. 1111 (1983).
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