- 13 - 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.Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Next
Last modified: May 25, 2011