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some portion of the underpayment is attributable to fraud.
See sec. 7454(a); Rule 142(b); DiLeo v. Commissioner, 96
T.C. 858, 873 (1991), affd. 959 F.2d 16 (2d Cir. 1992).
The term “underpayment” is defined in section 6664(a) as
“the amount by which any tax imposed by this title exceeds
the excess of (1) the sum of (A) the amount shown as the
tax by the taxpayer on his return, plus (B) amounts not so
shown previously assessed (or collected without
assessment), over (2) the amount of rebates made.” The
Commissioner must establish fraud with respect to
the taxpayer’s return for each taxable year. See Otsuki
v. Commissioner, 53 T.C. 96, 105 (1969); AJF Transp.
Consultants, Inc. v. Commissioner, T.C. Memo. 1999-16.
If the Commissioner establishes that any portion of
the underpayment is attributable to fraud, then the entire
underpayment is treated as attributable to fraud, unless
the taxpayer establishes by a preponderance of evidence
that it is not attributable to fraud. See sec. 6663(b).
In the case of a joint return, the fraud penalty shall not
apply to a spouse unless some part of the underpayment is
due to the fraud of that spouse. See sec. 6663(c).
To prove fraudulent intent, the Commissioner must
show that the taxpayer intended to evade tax believed to
be owing by conduct intended to conceal, mislead, or
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