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or that their purported reliance on Mr. Hinman was in good faith
or reasonable. The Cordeses did not show they requested or
received advice regarding these transactions, and any advice
regarding those transactions that were discussed was based on
incomplete and inaccurate information, information withheld by
Mr. Cordes.
The facts before us simply do not establish that the
reasonable cause exception in section 6664(c) applies.
Therefore, the Cordeses are liable for the accuracy-related
penalty due to negligence or disregard of rules or regulations
for the taxable years before us, to the extent the Rule 155
computation shows an underpayment of tax.
V. The Fraud Penalty
Respondent determined that CFC and Mr. Cordes are liable for
the fraud penalty for their 1994 and 1995 taxable years. Section
6663(a) provides: “If any part of any underpayment of tax
required to be shown on a return is due to fraud, there shall be
added to the tax an amount equal to 75 percent of the portion of
the underpayment which is attributable to fraud.” Section
6663(b) provides that if any portion of an underpayment is
attributable to fraud, then the entire underpayment shall be
treated as attributable to fraud unless the taxpayer shows by a
preponderance of the evidence that a portion was not so
attributable. Respondent has the burden of proving fraud by
clear and convincing evidence. Sec. 7454(a); Rule 142(b).
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