- 39 -
establish by a preponderance of the evidence that a portion is
not attributable to fraud. See secs. 6653(b)(2), 6663(b).
The Commissioner has the burden of proving fraud by clear
and convincing evidence. See sec. 7454; Rule 142(b); Parks v.
Commissioner, 94 T.C. at 660. First, the Commissioner must prove
that there is an underpayment. See Parks v. Commissioner, supra.
Second, the Commissioner must show that the taxpayer intended to
evade taxes by conduct intended to conceal, mislead, or otherwise
prevent tax collection. See Stoltzfus v. United States, 398 F.2d
1002, 1004 (3d Cir. 1968); Parks v. Commissioner, supra at 661;
Rowlee v. Commissioner, 80 T.C. 1111, 1123 (1983).
Petitioner has stipulated that he failed to report
significant amounts of interest income. In addition, he has
failed to establish that these amounts are offset by unreported
deductions. Therefore, we conclude that respondent has presented
sufficient evidence that petitioner underpaid his taxes for the
years in issue.
Next, respondent must prove by clear and convincing evidence
that petitioner had fraudulent intent. See Parks v.
Commissioner, supra at 664. Fraud is defined as an intentional
wrongdoing designed to evade tax believed to be owing. See
Edelson v. Commissioner, 829 F.2d 828, 833 (9th Cir. 1987), affg.
T.C. Memo. 1986-223. The existence of fraud is a question of
fact to be resolved upon consideration of the entire record. See
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