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tax returns and that they are liable for the fraud additions to
tax with respect to the construction expenses. The Atkinsons
also concede that they failed to report the credit card charges
as income. Still before us, however, is the issue of whether the
fraud additions to tax with regard to the credit card charges
should be sustained and whether the Atkinsons are liable for the
addition to tax pursuant to section 6661.
OPINION
I. Corporate Fraud
Generally, pursuant to section 6501(a), the Commissioner
must assess taxes owed and due on a tax return within 3 years
after the return is filed. Section 6501(c)(1), however, provides
that if a taxpayer fraudulently files a return, the 3-year
statute of limitations under section 6501(a) will not bar the
Commissioner from assessing and collecting the taxes owed and
due. Additionally, if any part of an underpayment of tax is due
to fraud, the Commissioner may impose fraud additions to tax
under section 6653(b)(1) and (2).10
In order to prove fraud, the Commissioner must show by clear
and convincing evidence that the taxpayer underpaid its tax and
10 Sec. 6653(b)(1) provides for an addition to tax in the
amount of 50 percent of the underpayment if any part of the
underpayment is due to fraud. Sec. 6653(b)(2) provides for an
addition to tax in the amount of 50 percent of the interest
payable under sec. 6601 with respect to the portion of the
underpayment which is attributable to fraud.
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