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In respondent's answer, respondent alleged in the alterna-
tive to the allegations in the answer that were based on the
determinations in the notice that petitioners had increased
deficiencies in tax (and underpayments) for the years at issue
and that such increased underpayments of tax are due to fraud.
OPINION
Except for the fraud penalty and the increased deficiencies
alleged in respondent's answer on which respondent has the burden
of proof, see sec. 7454(a); Rule 142(b) and (a), petitioners have
the burden of establishing that respondent's determinations in
the notice are erroneous, see Rule 142(a); Welch v. Helvering,
290 U.S. 111, 115 (1933).
We turn to the fraud penalty under section 6663. That is
because our resolution of that issue is determinative of pe-
titioners' contentions that respondent's deficiency determina-
tions in the notice are erroneous, that respondent has not shown
that petitioners have the increases in such deficiencies that
were alleged as part of respondent's alternative position in the
answer, and that the period of limitations for 1992 has expired.
In order for the fraud penalty to apply, respondent must
prove by clear and convincing evidence that an underpayment
exists and that some portion of such underpayment is attributable
to fraud. See secs. 6663(a), 7454(a); Rule 142(b); Niedringhaus
v. Commissioner, 99 T.C. 202, 210 (1992). If respondent es-
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