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expenses in the same amounts, resulting in no taxable income
reported for 1993, 1994, and 1995 Federal income tax purposes.
OPINION
Respondent determined that petitioner fraudulently failed to
report income by overstating its expenses and/or underreporting
its gross receipts on its 1993, 1994, and 1995 tax returns,
resulting in underpayments of $8,798, $34,661, $38,206,
respectively. Respondent determined that the entire underpayment
for each year is attributable to fraud. Therefore, respondent
determined that petitioner is liable for civil fraud penalties
under section 6663 in the amounts of $6,599, $25,996, and
$28,655, respectively.
Section 6663(a) provides that if any part of an underpayment
is due to fraud there shall be added to the tax an amount equal
to 75 percent of the portion of the underpayment which is
attributable to fraud. Fraud is defined as an intentional
wrongdoing designed to evade tax believed to be owing. See
Edelson v. Commissioner, 829 F.2d 828, 833 (9th Cir. 1987), affg.
T.C. Memo. 1986-223. Respondent has the burden of proving fraud
by clear and convincing evidence. See Rule 142(b). To satisfy
this burden, respondent must show (1) that an underpayment
exists, and (2) that the taxpayer intended to evade taxes known
to be owing by conduct intended to conceal, mislead, or otherwise
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