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Issue 31. Whether IRA Is Liable for the Fraud Addition to Tax
for 1987
OPINION
In an amended answer, respondent alleged that IRA was liable
for the addition to tax for fraud under section 6653(b) for 1987,
based on improper deductions claimed by IRA for certain bad debts
and capital losses. Although the Court has sustained
respondent's disallowance of these claimed deductions and losses,
it has done so, in some instances, because of IRA's failure to
establish that (1) the purported sales of many of the assets were
bona fide transactions, and (2) the purported buyer was not a
related party under section 267. Nevertheless, insofar as IRA's
liability for an addition to tax under section 6653(b) for 1987
is concerned, respondent bears the burden of proving, by clear
and convincing evidence, that some part of the underpayment for
that year resulting from these disallowed deductions and losses
was due to fraud. See sec. 7454(a); Rule 142(b).
Although IRA addressed this issue in its briefs, respondent
failed to do so. We therefore conclude that respondent abandoned
the fraud issue as to IRA for 1987. Accordingly, we hold that
IRA is not liable for the addition to tax for fraud under section
6653(b) for that year.
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