Leo M. Ryan, et al. - Page 63

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          fraud.  Sec. 6653(b)(1); DiLeo v. Commissioner, 96 T.C. 858, 873            
          (1991), affd. 959 F.2d 16 (2d Cir. 1992).  For the addition to              
          tax under section 6653(b)(2) to apply, the Commissioner must                
          establish the specific portion of the underpayment which is                 
          attributable to fraud.  Sec. 6653(b)(2); DiLeo v. Commissioner,             
          supra at 873.                                                               
               To prove an underpayment of tax, the Commissioner cannot               
          rely on the taxpayer's failure to satisfy his or her burden of              
          proof as to the underlying deficiency.  Parks v. Commissioner, 94           
          T.C. 654, 661 (1990).  Where allegations of fraud are intertwined           
          with unreported and indirectly reconstructed income, the                    
          Commissioner can prove an underpayment by proving a likely source           
          of the unreported income or, where the taxpayer alleges a                   
          nontaxable source, by disproving the alleged nontaxable source.             
          DiLeo v. Commissioner, supra at 873-874.                                    
               Wilson, Grove, and Cattalo were convicted under section                
          7206(1) of filing false returns for both 1982 and 1983.  Giongo             
          was convicted of filing a false return for 1983, but not 1982.              
          The convictions do not estop petitioners from denying that there            
          was an underpayment of tax or that any such underpayment was due            
          to fraud.  Considine v. United States, 227 Ct. Cl. 77, 80-81, 645           
          F.2d 925, 928 (1981); Wright v. Commissioner, 84 T.C. 636 (1985);           
          Franklin v. Commissioner, T.C. Memo. 1993-184.  The convictions,            
          however, are evidence to be considered in deciding whether                  
          respondent has proved an underpayment of tax due to fraud.                  



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