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return, a spouse is not liable for the fraud penalty unless some
portion of the underpayment is attributable to that spouse’s
fraudulent conduct. See sec. 6663(c).
In the context of Federal tax law, fraud entails intentional
wrongdoing with the purpose of evading a tax believed to be
owing. E.g., Neely v. Commissioner, 116 T.C. 79, 86 (2001). As
stated by the Court of Appeals for the Fifth Circuit:
‘Fraud implies bad faith, intentional wrongdoing and a
sinister motive. It is never imputed or presumed and
the court should not sustain findings of fraud upon
circumstances which at most create only suspicion.’
* * * ‘Negligence, whether slight or great, is not
equivalent to the fraud with intent to evade tax named
in the statute. The fraud meant is actual, intentional
wrongdoing, and the intent required is the specific
purpose to evade a tax believed to be owing. Mere
negligence does not establish either.’ * * *
Webb v. Commissioner, 394 F.2d 366, 377 (5th Cir. 1968) (quoting
Carter v. Campbell, 264 F.2d 930, 935-936 (5th Cir. 1959)), affg.
T.C. Memo. 1966-81.
To succeed in the instant case, respondent must show that he
had a reasonable basis for believing that he could prove his
allegation of petitioner’s fraud by clear and convincing
evidence. See, e.g., Rutana v. Commissioner, 88 T.C. 1329, 1337-
1338 (1987). More particularly, he must show that he had a
reasonable basis for believing that he could prove by clear and
convincing evidence that petitioner willfully intended to evade a
tax she believed to be owing.
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