Jerry L. Crabtree - Page 31

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                  Section 6663(a) provides that, if any part of an                    
             underpayment 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.  The                        
             Commissioner bears the burden of proving by clear and                    
             convincing evidence that:  (1) An underpayment exists;                   
             and (2) some portion of the underpayment is attributable                 
             to fraud.  See sec. 7454(a); Rule 142(b); DiLeo v.                       
             Commissioner, 96 T.C. 858, 873 (1991), affd. 959 F.2d 16                 
             (2d Cir. 1992).  The term “underpayment” is defined in                   
             section 6664(a) as “the amount by which any tax imposed by               
             this title exceeds the excess of (1) the sum of (A) the                  
             amount shown as the tax by the taxpayer on his return, plus              
             (B) amounts not so shown previously assessed (or collected               
             without assessment), over (2) the amount of rebates made.”               
             The Commissioner must establish that the taxpayer is guilty              
             of fraud with respect to his or her return for each taxable              
             year.  E.g., Otsuki v. Commissioner, 53 T.C. 96, 105                     
             (1969); AJF Transp. Consultants, Inc. v. Commissioner, T.C.              
             Memo. 1999-16.  If the Commissioner establishes that any                 
             portion of the underpayment is attributable to fraud, then               
             the entire underpayment is treated as attributable to                    
             fraud, unless the taxpayer establishes by a preponderance                

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