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petitioner’s deductions of the credit card charges, the Atkinsons
are liable for the fraud addition to tax under section 6653(b)(1)
on the underpayment associated with the failure to include in
income the credit card charges. The Atkinsons are liable for the
fraud addition to tax under section 6653(b)(2) only on the
underpayment attributable to the fraudulent failure to include in
income the construction expenses.
B. 1986 Calendar Year
In 1986, Congress amended section 6653(b), effective for tax
returns with a due date after December 31, 1986. See Tax Reform
Act of 1986, Pub. L. 99-514, sec. 1503, 100 Stat. 2085, 2742.
Congress consolidated the fraud additions to tax, formerly under
section 6653(b)(1) and (2), into section 6653(b)(1). Through
amended section 6653(b)(1), Congress provided that only the
portion of the underpayment attributable to fraud would be
subject to the fraud additions to tax:
SEC. 6653(b) Fraud.--
(1) In General.--If any part of any underpayment (as
defined in subsection(c)) of tax required to be shown on a
return is due to fraud, there shall be added to the tax an
amount equal to the sum of–-
(A) 75 percent of the portion of the underpayment
which is attributable to fraud, and
(B) an amount equal to 50 percent of the interest
payable under section 6601 with respect to such portion
* * *
Under amended section 6653(b)(2), however, once the
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