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uphold respondent’s determination that the amount of $105,000 be
included in petitioner's 1989 gross income.4
3. Fraud
Respondent determined that petitioner is liable for an
addition to tax for fraud for each of the years 1986, 1987, 1988,
and 1989. Respondent bears the burden of proof on this issue.
See sec. 7454(a); Rule 142(b). In order to discharge the burden,
respondent must prove by clear and convincing evidence: (1) An
underpayment exists for each year in issue, and (2) some portion
of the underpayment for that year is due to fraud. See sec.
7454(a); Petzoldt v. Commissioner, 92 T.C. 661, 699 (1989).
In order to show fraud respondent must show that petitioner
intended to evade taxes known to be owing by conduct designed to
conceal, mislead, or otherwise prevent the collection of taxes.
See Stoltzfus v. United States, 398 F.2d 1002, 1004 (3d Cir.
1968); Rowlee v. Commissioner, 80 T.C. 1111, 1123 (1983). Fraud
is intentional wrongdoing on the part of the taxpayer with the
specific intent to evade a tax known to be owing. See Bradford
v. Commissioner, 796 F.2d 303, 307 (9th Cir. 1986), affg. T.C.
Memo. 1984-601; Conforte v. Commissioner, 692 F.2d 587, 592 (9th
4Petitioner has made no claim for deductions of legal fees
and costs in the event we were to find the $105,000 includable in
gross income; therefore, we express no opinion on the
deductibility of these items under the particular facts of this
case.
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