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II. Was Petitioner's Failure To File Returns Fraudulent,
for Each of the Years 1989-92?
Section 6651(a)(1) provides that in the case of failure to
file a required income tax return when due, unless it is shown
that such failure is due to reasonable cause:
there shall be added to the amount required to be shown
as tax on such return 5 percent of the amount of such
tax if the failure is for not more than 1 month, with
an additional 5 percent for each additional month * * *
during which such failure continues, not exceeding 25
percent in the aggregate;
Section 6651(f) provides that if any failure to file any
income tax return is "fraudulent", section 6651(a)(1) shall be
applied by substituting "15 percent" for "5 percent", and "75
percent" for "25 percent".
In determining whether a failure to file a return is
fraudulent under section 6651(f), we consider the same elements
as we did when considering the imposition of the addition to tax
for fraud under prior law (former section 6653(b)(1)), and as we
do under present section 6663. See H. Rept. 101-247, at 1402-
1403 (1989); Clayton v. Commissioner, 102 T.C. 632, 651-653
(1994). A finding of fraud for any year therefore requires proof
that (1) there was an underpayment of tax for that year, and (2)
at least some part of the underpayment was due to fraud. See
Petzoldt v. Commissioner, 92 T.C. 661, 698-699 (1989).
With respect to the issue of fraud, respondent has the
burden of proof, and must meet that burden with clear and
convincing evidence. See sec. 7454(a); Rule 142(b).
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