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(6th Cir. 1994), affg. T.C. Memo. 1992-616. Section 7454(a)
provides that, in any case involving the issue of fraud with
intent to evade tax, the burden of proof in respect of that issue
is on respondent. Respondent’s burden of proof with respect to
the issue of fraud is to be carried by clear and convincing
evidence. Rule 142(b). Fraud is not to be presumed or based
upon circumstantial evidence which creates merely a suspicion of
fraud. Wainwright v. Commissioner, T.C. Memo. 1993-302 (citing
Carter v. Campbell, 264 F.2d 930, 935 (5th Cir. 1959)).
To support a finding of tax fraud, respondent must show that
the taxpayer engaged in conduct with the intent to evade taxes
that he knew or believed to be owing. United States v. Walton,
909 F.2d 915, 926 (6th Cir. 1990). Direct evidence of intent is
often unavailable and unnecessary; the courts may infer
fraudulent intent from strong circumstantial evidence. Id.
In fraud cases, it may happen that, although the taxpayer
fails to overcome the presumption of correctness as to the
asserted deficiencies in tax, the Commissioner will also fail to
establish that the same deficiencies were the result of fraud.
"Both parties to a proceeding may fail through inadequate proof
on the several issues." Kashat v. Commissioner, 229 F.2d 282,
285 (6th Cir. 1956), affg. in part and revg. in part a Memorandum
Opinion of this Court dated March 29, 1954. "That this differing
burden of proof in the Tax Court can have an important
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