Linda D. Fason - Page 8

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          portion of the underpayment which is attributable to fraud.”                
          Section 6663(b) further provides:                                           
               If the Secretary establishes that any portion of an                    
               underpayment is attributable to fraud, the entire                      
               underpayment shall be treated as attributable to fraud,                
               except with respect to any portion of the underpayment                 
               which the taxpayer establishes (by a preponderance of                  
               the evidence) is not attributable to fraud.                            
          To establish the existence of fraud, respondent bears the burden            
          of proving by clear and convincing evidence that (1) an                     
          underpayment of income tax exists and (2) some portion of that              
          underpayment is due to fraud.  See sec. 7454(a); Rule 142(b);               
          Clayton v. Commissioner, 102 T.C. 632, 646 (1994); Recklitis v.             
          Commissioner, 91 T.C. 874, 909 (1988).                                      
               Fraud is generally defined as intentional wrongdoing on the            
          part of the taxpayer, with the specific purpose of evading tax              
          believed to be owed.  See Powell v. Granquist, 252 F.2d 56, 60              
          (9th Cir. 1958).  Respondent must therefore prove that the                  
          taxpayer “intended to evade tax believed to be owing by conduct             
          intended to conceal, mislead, or otherwise prevent the collection           
          of such tax.”  Clayton v. Commissioner, supra at 647; Recklitis             
          v. Commissioner, supra at 909.  Nonetheless, respondent “need not           
          establish that tax evasion was a primary motive of the taxpayer,            
          but may satisfy the burden by showing that a tax-evasion motive             
          played any part in the taxpayer’s conduct”.  Clayton v.                     
          Commissioner, supra at 647.                                                 

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