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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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