Zinovy Brodsky - Page 64




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          the years at issue for the fraud penalty under section 6663(a) on            
          the entire amount of the underpayment for each of those years.               
               Section 6663(a) imposes a penalty equal to 75 percent of the            
          portion of any underpayment that is attributable to fraud.  For              
          purposes of section 6663(a), if the Commissioner establishes that            
          any portion of an underpayment is attributable to fraud, the                 
          entire underpayment is to be treated as attributable to fraud,               
          except with respect to any portion of the underpayment that the              
          taxpayer establishes by a preponderance of the evidence is not               
          attributable to fraud.  Sec. 6663(b).  In order for the fraud                
          penalty to apply, the Commissioner must prove by clear and                   
          convincing evidence, sec. 7454(a); Rule 142(b), that an underpay-            
          ment exists and that some portion of such underpayment is attrib-            
          utable to fraud.  Niedringhaus v. Commissioner, 99 T.C. 202, 210             
          (1992).                                                                      
               Underpayment                                                            
               To prove the existence of an underpayment, the Commissioner             
          may not rely on a taxpayer’s failure to carry his or her burden              
          of proof with respect to the underlying deficiency.  Parks v.                
          Commissioner, 94 T.C. 654, 660-661 (1990); Petzoldt v. Commis-               
          sioner, 92 T.C. 661, 700 (1989).  The Commissioner must prove                
          only that an underpayment exists, and not the precise amount of              
          such underpayment.  DiLeo v. Commissioner, 96 T.C. at 873;                   
          Petzoldt v. Commissioner, supra at 699.  When an allegation of               
          fraud is intertwined with reconstructed unreported income, as it             
          is in the present case, the Commissioner may satisfy the burden              






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