- 17 -
which the taxpayer discovers the loss. Sec. 1.165-8(a)(2),
Income Tax Regs.
Petitioner testified that he did not learn of the loss until
bank records for the refund account were obtained by the IRS in
the criminal investigation. The criminal investigation did not
begin until June 1994. We need not decide whether the purported
loss occurred, because, for purposes of section 165, the loss, if
any, was sustained in 1994, and petitioner is not entitled to a
deduction for the loss in the 1990 taxable year.
Issue IV. Whether Petitioner Is Liable for the Fraud Penalty
Under Section 6663 for the 1990, 1991, and 1992 Taxable Years
Respondent determined that petitioner is liable for an
addition to tax for fraud under section 6663(a) for each of the
years at issue. Section 6663(a)(1) provides: "If any part of
any underpayment of tax required to be shown on a return is due
to fraud, there shall be added to the tax an amount equal to 75
percent of the portion of the underpayment which is attributable
to fraud." Section 6663(b) provides that if the Secretary
establishes that any portion of the underpayment is due to fraud,
the entire underpayment is treated as fraudulent, except for the
portion the taxpayer proves is not attributable to fraud.
Fraud is intentional wrongdoing on the part of the taxpayer
with specific intent to avoid tax known to be owing. Bradford v.
Commissioner, 796 F.2d 303 (9th Cir. 1986), affg. T.C. Memo.
1984-601; Rowlee v. Commissioner, 80 T.C. 1111, 1123 (1983). The
Commissioner must prove fraud by clear and convincing evidence.
Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 NextLast modified: May 25, 2011