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meet its burden. Accordingly, respondent’s deficiency
determinations with regard to the credit card charges are
sustained.
2. Fraud Additions to Tax Pursuant to Section
6653(b)(1) and (2)
Pursuant to section 6653(b)(2), respondent may impose a
fraud addition to tax on the portion of the underpayment
attributable to fraud. In this case, respondent provided no
evidence that petitioner committed fraud by deducting the credit
card charges. The addition to tax under section 6653(b)(2),
therefore, may be imposed on only the underpayment attributable
to the deductions of the construction expenses. Pursuant to
section 6653(b)(1), however, the fraud addition to tax applies to
the entire underpayment ultimately determined even if respondent
manages to prove that only part of the underpayment is due to
fraud. Hence, the fraud addition to tax under section 6653(b)(1)
is also applicable to the underpayment resulting from the
deductions of the credit card charges.
II. The Atkinsons’ Fraud
A. 1985 Calendar Year
The Atkinsons concede that they committed fraud by not
including the construction expenses in income. Respondent,
however, has failed to provide clear and convincing evidence that
the Atkinsons committed fraud by not including the credit card
charges in income. As explained above with regard to
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