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The Commissioner has the burden of proving fraud by clear
and convincing evidence. Sec. 7454(a); Rule 142(b). To satisfy
the burden of proof, the Commissioner must show: (1) An
underpayment exists; and (2) the taxpayer intended to evade taxes
known to be owing by conduct intended to conceal, mislead, or
otherwise prevent the collection of taxes. See Parks v.
Commissioner, 94 T.C. 654, 660-661 (1990). The Commissioner must
meet this burden through affirmative evidence because fraud is
never imputed or presumed. Beaver v. Commissioner, 55 T.C. 85,
92 (1970).
For 1985, if any part of the underpayment is due to fraud,
section 6653(b)(1) imposes an addition to tax equal to 50 percent
of the underpayment, and section 6653(b)(2) imposes a separate
addition to tax, equal to 50 percent of the interest payable
under section 6601, determined on the portion of the underpayment
attributable to fraud. For 1986 and 1987, if any part of the
underpayment is due to fraud, section 6653(b)(1)(A) imposes an
addition to tax equal to 75 percent of the portion of the
underpayment attributable to fraud, and section 6653(b)(1)(B)
imposes a separate addition to tax, equal to 50 percent of the
interest payable under section 6601, determined on the portion of
the underpayment attributable to fraud. For 1988, if any part of
the underpayment is due to fraud, section 6653(b)(1) imposes an
addition to tax equal to 75 percent of the portion of the
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