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1993 at that profession. Finally, he admittedly
transferred title to his home and vehicles from
joint ownership to single ownership by Patricia
Vetrano in an attempt to place these assets
beyond respondent’s reach should the Court
determine that she is an innocent spouse under
I.R.C. �6013(e) for the years at issue.
[Citations omitted.]
Respondent argues that Mrs. Vetrano’s conduct exhibits the
following badges of fraud:
She was an active participant in her husband’s
attempts to conceal the correct amount of his
1993 income. She handled all of the BMAP checks,
cashed them, and received the proceeds. She
endorsed most of these checks, and on some
occasions signed her husband’s name on them.
She dealt in cash to avoid scrutiny of her and
her husband’s finances. Her actions were
designed to cover up the source of his income
from his first wife, the divorce court, and not
coincidentally, the Internal Revenue Service.
Mrs. Vetrano signed a joint tax return containing
an amount of income for her husband that she knew
had to be false. She also took title to their
home and vehicles in an attempt to place them
beyond respondent’s reach. [Citations omitted.]
In their posttrial brief, petitioners’ only mention of
the fraud penalty is the following:
The IRS has asserted the civil fraud penalty
against Mr. Vetrano and amazingly against
Mrs. Vetrano as well. Pursuant to 26 U.S.C. �
7454 and Tax Court Rule 142(b), this shifts the
burden of proof to the IRS. Such fraud must be
proven by clear and convincing evidence. Smith
v. Commissioner, 91 T.C. 1049, 1053 (1988). In
unreported income cases the burden is on the
IRS to offer a rational basis for the deficiency
and if no rational basis exists for the proposed
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