- 13 -
Respondent bears the burden of proof to show by clear and
convincing evidence that (1) an underpayment exists, and (2) some
part of the underpayment is due to fraud. See Rule 142(b).
Where fraud is determined for each of several years, respondent's
burden applies separately for each of the years. See Estate of
Stein v. Commissioner, 25 T.C. 940, 959-963 (1956), affd. per
curiam sub nom. Levine v. Commissioner, 250 F.2d 798 (2d Cir.
1958).
A. Underpayment of Tax
Where the allegations of fraud are intertwined with
unreported and indirectly reconstructed income, respondent may
prove an underpayment either (1) by proving a likely source of
the unreported income or (2) where the taxpayer alleges a
nontaxable source, by disproving the nontaxable source so
alleged. See Parks v. Commissioner, supra.
Respondent contends that petitioner's unreported income in
the years in issue was the result of petitioner's skimming from
the Bijou's cash receipts, and such skimmed receipts constitute
constructive dividends which are taxable to petitioner.
Respondent carefully reconstructed the procedures used at
the Bijou for dealing with its daily cash receipts in 1980, 1981,
and 1982 and petitioner's unfettered access to those receipts.
Petitioner was the sole person with access to the drop safe at
the Bijou. Petitioner collected the drop envelopes from the
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Next
Last modified: May 25, 2011