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OPINION
For the reasons set forth below, we sustain all of
respondent's determinations.
Respondent determined that petitioners, on their 1987 tax
return, failed to report $4,838 of capital gain and $2,100 of
rental income, erroneously claimed a depreciation deduction
relating to an automobile, and overstated deductions for
charitable contributions and depreciation relating to rental
property. Petitioners bear the burden of proof, see Welch v.
Helvering, 290 U.S. 111, 115 (1933), yet have failed to establish
that respondent's determinations are incorrect.
Respondent also determined that petitioners, pursuant to
sections 6653(b)(1)(A) and (B), 6653(b), and 6663, are liable for
additions to tax, and a penalty, for fraud. To prove fraud,
respondent must establish, by clear and convincing evidence, that
for each year in issue an underpayment of tax exists and that
some portion of the underpayment is due to fraud. See Petzoldt
v. Commissioner, 92 T.C. 661, 699 (1989).
Respondent has established that, for each year in issue,
petitioners' underpayment of tax was fraudulent. Each of
petitioners' amended returns is an admission of a tax
underpayment. See Badaracco v. Commissioner, 464 U.S. 386, 399
(1984). In addition, petitioners' actions warrant an inference
of fraud. Petitioners intentionally understated their income and
overstated their deductions. As a result, in 1987, 1988, and
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Last modified: May 25, 2011