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IV. Additions to Tax
A. Section 6653
Respondent determined that petitioner was liable for
additions to tax for 1983 and 1985 under section 6653(b)(1) and
(2).
1. Section 6653(b)(1)
Section 6653(b)(1) imposes an addition to tax equal to
50 percent of any underpayment in tax if any part of such
underpayment is due to fraud. Respondent bears the burden of
proving fraud by clear and convincing evidence. See sec.
7454(a); Rule 142(b). To prevail under section 6653(b)(1),
respondent must show both (1) an underpayment of tax exists and
(2) some part of the underpayment is due to fraud. See, e.g.,
DiLeo v. Commissioner, 96 T.C. 858, 873 (1991), affd. 959 F.2d 16
(2d Cir. 1992).
a. Existence of Underpayment
The first element of section 6653(b)(1) is whether any
underpayment of tax exists. Section 6653(c)(1) defines an
"underpayment" for purposes of section 6653 as a "deficiency"
defined by section 6211. We have found that, for 1983,
petitioner understated his income by $1,260,000 and, for 1985,
erroneously failed to report a gain realized on the sale of the
Wedtech shares. Each omission resulted in a deficiency in tax;
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