- 18 - Fraud of John Fraud exists if “any part of any underpayment of tax required to be shown on a return is due to fraud”. Sec. 6663(a). John filed amended tax returns for each of the tax years 1989- 1991 showing increases in tax owed, effectively conceding that there was an underpayment in each year. Thus, we must decide whether any portion of each underpayment was due to fraud. The existence of fraud is a question of fact. See Hagaman v. Commissioner, 958 F.2d 684, 696 (6th Cir. 1992), affg. and remanding on other grounds T.C. Memo. 1987-549. Respondent has the burden of proof to show fraud by clear and convincing evidence. See sec. 7454(a); Rule 142(b). To establish fraud, respondent must show that the taxpayer “engaged in conduct with the intent to evade taxes that he knew or believed to be owing.” United States v. Walton, 909 F.2d 915, 926 (6th Cir. 1990). We may rely on circumstantial evidence to establish fraud. See id. Fraud may be inferred from “any conduct, the likely effect of which would be to mislead or to conceal.” Spies v. United States, 317 U.S. 492, 499 (1943). John engaged in much conduct that was likely to mislead or conceal. He engaged in a consistent pattern of underreporting income. See Holland v. United States, 348 U.S. 121, 137 (1954). He diverted corporate funds for his own use and concealed the diversion from his brother, the other 50-percent shareholder ofPage: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Next
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