- 12 - Respondent relies on the principles of cases such as Badaracco v. Commissioner, 464 U.S. 386, 401 (1984), and Helvering v. Mitchell, 303 U.S. 391, 401 (1938), to the effect that fraud is established upon the filing of a fraudulent return and that the fraud penalty reimburses the Government for detecting, investigating, and prosecuting fraud. Although we have no qualms about respondent's recitation of this well-settled law, whether the estate is liable for fraud is not at issue here. We decided that issue in Estate of Trompeter v. Commissioner, T.C. Memo. 1998-35, where we found that the estate had committed fraud when it filed its estate tax return. We disagree with any implication, however, that this body of law supports an interpretation of the phrase "tax required to be shown on a return" contrary to that which we espouse. The relevant phrase does not apply just to cases of fraud. The same phrase appears in section 6662(a), which, among other things, imposes a 20-percent accuracy-related penalty on underpayments attributable to negligence and substantial understatement. We hold that an estate's underpayment is determined by taking into account all amounts which it is allowed to deduct in computing its Federal estate tax liability. Respondent is concerned that our holding will lead to bad tax policy in that the "government's reimbursement [through the fraud penalty] could be consumed by the * * * [estate's] counsels' fees and fees being paid to the trustees, who happen to be the beneficiaries of thePage: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Next
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