Phillip A. O'Bryon and Cyndie W. O'Bryon - Page 19




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          another in a business transaction; and (9) the taxpayer's                   
          experience and knowledge.  See Solomon v. Commissioner, 732 F.2d            
          1459, 1461-1462 (6th Cir. 1984), affg. per curiam T.C. Memo.                
          1982-603; see also Kalo v. Commissioner, T.C. Memo. 1996-482,               
          affd. without published opinion 149 F.3d 1183 (6th Cir. 1998);              
          Conti v. Commissioner, T.C. Memo. 1992-616, affd. 39 F.3d 658               
          (6th Cir. 1994); Zack v. Commissioner, T.C. Memo. 1981-700, affd.           
          692 F.2d 28 (6th Cir. 1982).                                                
               Respondent should not pursue litigation of a civil fraud               
          penalty unless he has a reasonable basis for believing that he              
          could prove fraud by clear and convincing evidence.  See Rutana             
          v. Commissioner, 88 T.C. 329, 1337-1338 (1987); Don Casey Co. v.            
          Commissioner, 87 T.C. 847, 862 (1986).  In this case, however, we           
          think it is highly likely that respondent would have successfully           
          proved Phillip's fraud by clear and convincing evidence.  Phillip           
          engaged in the fraudulent Ponzi scheme, defrauded his clients,              
          failed to report on his tax returns for multiple years the                  
          substantial income received from that illegal activity, and                 
          failed to keep accurate records.  Thus, respondent's position was           
          substantially justified.                                                    
          Relief From Joint Liability                                                 
               In the petition, Cyndie claimed that she was entitled to               
          relief under section 6015 and should be relieved of liability for           
          tax attributable to understatements of taxable income by Phillip.           






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