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maintain records of trip sheets and manifests which would have
verified the existence of casual labor and cash payments to the
alleged casual labor. Petitioners failed to keep a list of the
names and Social Security numbers of alleged casual laborers. We
think petitioners intentionally chose not to maintain adequate
records of their activities in order to conceal income.
Finally, petitioners AJF and Ferrentino have deliberately
failed to report $442,138 and $475,805.34, respectively, in
cashed checks over the course of the 3 taxable years in issue.
We conclude that respondent has proven by clear and
convincing evidence that at least part of petitioners'
underpayment for each taxable year involved is attributable to
fraud with the intent to evade tax. Therefore, the fraudulent
return exception under section 6501(c)(1) applies.
II. The Additions to Tax and Fraud Penalties Under Secs. 6653(b)
and 6663(a)
Respondent has determined that petitioners owe additions to
tax and penalties under sections 6653(b) and 6663(a). Section
6663(a) 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." Once the
Secretary establishes that a part of an underpayment is due to
fraud, "the entire underpayment shall be treated as attributable
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