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After considering the entire record, we find nothing that
would support the conclusion that respondent’s determination is
arbitrary or excessive. Indeed, we find the items shown in the
consolidated net worth calculation set out in the appendix to be
supported by the record. Therefore, we sustain respondent’s
determination of deficiencies in each of the years in question.
Respondent also determined that petitioner is liable for an
addition to tax for fraud for each of the years 1987, 1988, 1989,
and 1990. 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 that: (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); Clayton v. Commissioner, 102 T.C. 632 (1994);
Petzoldt v. Commissioner, 92 T.C. 661, 699 (1989). On the basis
of respondent’s net worth computation and the evidence supporting
it, we find that respondent has clearly and convincingly
established that petitioner had taxable income on which there was
an underpayment of tax for each of the years in issue.
In order to show that some portion of an underpayment is due
to fraud, respondent must also 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);
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