- 62 -
United States v. Massei, 355 U.S. 595 (1958) (per curiam);
Holland v. United States, 348 U.S. 121, 137-138 (1954); United
States v. Smith, 890 F.2d 711, 714 (5th Cir. 1989). We have
concluded that respondent has proved likely sources for the
unreported income and negated petitioners’ claimed nontaxable
source for those excess applications of funds. Respondent’s
negation of a nontaxable source combined with petitioners’
concessions relating to items reflected in respondent’s source
and application of funds analyses for Frank and Katherine, Larry,
Ronnie, and Sylvia establish that Frank and Katherine omitted
income for each year in issue. Each omission of income resulted
in a deficiency in tax; Frank and Katherine’s omissions of income
over the years in issue, thus, clearly and convincingly establish
underpayments of tax for 1983 through 1990.26 See, e.g., Biaggi
v. Commissioner, T.C. Memo. 2000-48, affd. in unpublished opinion
__ F.3d __ (2d Cir. 2001).
Accordingly, we hold that respondent has satisfied the first
element of establishing fraud by showing through clear and
convincing evidence that Frank and Katherine had underpayments of
tax for each of the years in issue. We next address whether
26 However, see infra sec. I.C. of this Opinion wherein we
discuss various adjustments we have made to the source and
application of funds analyses for purposes of deciding the amount
of understated income for each year in issue.
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