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Pursuant to these sections, any computation of the "tax
imposed by this title" made without reference to the point in
time that the return was required to be filed, would have to
include both interest and penalties. The majority clearly does
not contemplate that interest and penalties be included in "tax
imposed by this title" for purposes of computing the
"underpayment" to which the fraud penalty applies. However, the
only way to avoid such a result is to interpret section 6663 as
imposing the fraud penalty on the underpayment of tax that was
required to be shown on the taxpayer's return at the time it was
filed.6 Prior to the 1989 enactment of sections 6663 and 6664,
the fraud penalty provided for by section 6653(b) was based on an
"underpayment" that was generally defined in section 6653(c) as a
"deficiency" within the meaning of section 6211. Neither the
fraud penalty nor interest is within the definition of a
"deficiency" pursuant to sections 6211 and 6601(e). See White v.
Commissioner, 95 T.C. 209 (1990); Estate of DiRezza v.
Commissioner, 78 T.C. 19 (1982).
Finally, the purpose of the fraud penalty is to reimburse
the Government for the heavy expense of investigation and the
loss resulting from the taxpayer's fraud. Helvering v. Mitchell,
303 U.S. 391, 401 (1938); Ianniello v. Commissioner, 98 T.C. 165,
180 (1992). The majority would allow a fraudulent taxpayer to
reduce the penalty by costs incurred to fight the Government's
6The tax required to be shown on a timely filed return would
not include any interest or penalty.
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