AJF Transportation Consultants, Inc. - Page 11




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             fraudulent return with the intent to evade tax, the tax may be                                       
             assessed, or a proceeding in court for collection of such tax may                                    
             be begun without assessment, at any time."                                                           
                    Where respondent asserts that a taxpayer has filed a                                          
             fraudulent return with the intent to evade tax, the burden of                                        
             proof is on the respondent.  Sec. 7454(a); Rule 142(b).                                              
             Respondent must satisfy his burden of proof with "clear and                                          
             convincing evidence".  Rule 142(b); Fox v. Commissioner, 61 T.C.                                     
             704, 717 (1974).  To establish fraud, respondent must prove, by                                      
             clear and convincing evidence, for each year and with respect to                                     
             each petitioner, that: "(1) petitioner underpaid his income tax                                      
             and (2) some part of the underpayment was due to fraud."                                             
             Recklitis v. Commissioner, 91 T.C. 874, 909 (1988) (citations                                        
             omitted); see also Hebrank v. Commissioner, 81 T.C. 640, 642                                         
             (1983).                                                                                              
                    Although respondent need not prove the precise amount of the                                  
             underpayment resulting from fraud, respondent may not carry his                                      
             burden by merely relying on a taxpayer's failure to carry the                                        
             burden of proof on the underlying deficiency.  DiLeo v.                                              
             Commissioner, 96 T.C. 858, 873 (1991), affd. 959 F.2d 16 (2d Cir.                                    
             1992); Otsuki v. Commissioner, 53 T.C. 96, 106 (1969).                                               
                    A.  Underreporting of Tax                                                                     
                    Respondent asserts that petitioners had unreported income                                     
             arising from the checks issued by J.C. Penney for delivery                                           
             services rendered by AJF to Custom Decorating and fuel                                               
             reimbursements for fuel expenses incurred by AJF.                                                    

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Last modified: May 25, 2011