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We have found that respondent proved with clear and
convincing evidence that Frank and Katherine fraudulently
understated their income for the years in issue. Thus,
respondent has proved that Frank and Katherine are liable for the
additions to tax for fraud under section 6653(b) and penalties
for fraud under section 6663. Accordingly, we sustain
respondent’s determination as to the imposition of additions to
tax, or penalties, for fraud for each of the years in issue.
However, as to the interest-sensitive additions to tax imposed
under section 6653(b)(2) for 1983, 1984, and 1985,30 we sustain
respondent’s determination only as to the portion of the
underpayments of tax for each of those years that respondent has
shown to be attributable to fraud in accordance with our findings
addressed in subsection B of this opinion.
2. Section 6661
Respondent determined that petitioners are liable for the
addition to tax under section 6661 for 1983 through 1988 as a
result of the "substantial understatement of income tax" in each
of those years. If there is a substantial understatement of
income tax, section 6661(a) imposes an addition to tax equal to
25 percent of the underpayment attributable to the
30 For 1986 and 1987, petitioners have the burden of
establishing what portion, if any, of the understatement is not
attributable to fraud. Sec. 6653(b)(2). They have failed to
carry that burden.
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