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under section 6501(c)(1) is the same as the determination of
fraud for purposes of the penalty under section 6663, see Rhone-
Poulenc Surfactants & Specialties v. Commissioner, 114 T.C. 533,
548 (2000), and an extensive body of law exists addressing the
fraud penalty in the income, estate, and gift tax contexts. We
shall rely on such case law in our analysis below.
Fraud is defined as an intentional wrongdoing designed to
evade tax believed to be owing. See Edelson v. Commissioner, 829
F.2d 828, 833 (9th Cir. 1987), affg. T.C. Memo. 1986-223; McGee
v. Commissioner, 61 T.C. 249, 256 (1973), affd. 519 F.2d 1121
(5th Cir. 1975). The Commissioner bears the burden of proving
fraud and must establish it by clear and convincing evidence.
See sec. 7454(a); Rule 142(b). To satisfy the burden of proof,
the Commissioner must show that (1) an underpayment in tax
exists, and (2) the taxpayer intended to conceal, mislead, or
otherwise prevent the collection of taxes. See Parks v.
Commissioner, 94 T.C. 654, 660-661 (1990).
Petitioner concedes that his failure to include the cash
payments made to the workers on the appropriate employment tax
returns resulted in an understatement in tax. Accordingly, we
focus on whether the understatement was a product of fraudulent
intent. As described below, the record in this case does not
support a finding that petitioner acted with an intent to
conceal, mislead, or otherwise prevent the collection of taxes.
Petitioner testified that he believed the employment tax
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