- 149 - 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 burdenPage: Previous 139 140 141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 Next
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