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OPINION
I. Fraud
The penalty in the case of fraud is a civil sanction
provided primarily as a safeguard for the protection of the
revenue and to reimburse the Government for the heavy expense of
investigation and the loss resulting from a taxpayer's fraud.
See Helvering v. Mitchell, 303 U.S. 391, 401 (1938). Fraud is
intentional wrongdoing on the part of the taxpayer with the
specific purpose to evade a tax believed to be owing. See McGee
v. Commissioner, 61 T.C. 249, 256 (1973), affd. 519 F.2d 1121
(5th Cir. 1975).
The Commissioner has the burden of proving fraud by clear
and convincing evidence. See sec. 7454(a); Rule 142(b). To
satisfy the burden of proof, the Commissioner must show: (1) An
underpayment exists; and (2) the taxpayer intended to evade taxes
known to be owing by conduct intended to conceal, mislead, or
otherwise prevent the collection of taxes. See Parks v.
Commissioner, 94 T.C. 654, 660-661 (1990). The Commissioner must
meet this burden through affirmative evidence because fraud is
never presumed. See Beaver v. Commissioner, 55 T.C. 85, 92
(1970).
A. Underpayment
The parties agree that (1) petitioner's tax liabilities for
1989 and 1990, not including penalties, interest, or credits for
withholding, are $41,852.64 and $5,725, respectively; (2) on the
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Last modified: May 25, 2011