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B. Additions to Tax for Fraud Under Section 6653(b)
1. Background
Respondent contends that petitioner is liable for the
addition to tax for fraud under section 6653(b) for 1987 and 1988
and that TCM is liable for the addition to tax for fraud under
section 6653(b) for 1987. Respondent has the burden of proving
fraud by clear and convincing evidence. See sec. 7454(a); Rule
142(b). Respondent must establish: (a) Each petitioner
underpaid tax for each year in issue, and (b) some part of the
underpayment is due to fraud. See sec. 6653(b); Parks v.
Commissioner, 94 T.C. 654, 660-661 (1990); Petzoldt v.
Commissioner, 92 T.C. 661, 699 (1989).
2. Underpayment
Respondent has shown that TCM underpaid tax for 1987 by
failing to report: (1) $298,601.27 from NSA checks payable to
Camaro; (2) $19,738.65 from 17 checks from various sources that
TCM diverted to the Double D account; and (3) $3,804.98 from
Midtex Relays and NSA checks deposited to petitioner’s personal
account or cashed by petitioner. Respondent has also shown that
petitioner underpaid tax by failing to report constructive
dividend income from TCM of $308,723.36 in 1987 and his
distributive share of TCM income of $1,421,217.97 in 1988.
Therefore, respondent meets this requirement.
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