William F. Middleton - Page 10




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         evidence.  Accordingly, we hold that petitioner is not entitled              
         to Schedule C business deductions in excess of $127,879 and                  
         $157,207 for the taxable years 1990 and 1991, respectively.                  
         II.  Is Petitioner Liable for the Fraud Penalty for 1990?                    
               Section 6663(a) provides for a 75-percent penalty on any               
         part of an underpayment that is due to fraud.  Respondent bears              
         the burden of showing by clear and convincing evidence that an               
         underpayment exists for the year in issue and that it is due to              
         fraud.  Sec. 7454(a); Rule 142 (b).  Fraud has been defined as an            
         intentional wrongdoing designed to evade tax believed to be                  
         owing.  Bradford v. Commissioner, 796 F.2d 303, 307 (9th Cir.                
         1986), affg. T.C. Memo. 1984-601.  The existence of fraud is a               
         question of fact to be resolved upon consideration of the entire             
         record.  Estate of Pittard v. Commissioner, 69 T.C. 391, 400                 
         (1977).  Fraud is not to be imputed or presumed.  Beaver v.                  
         Commissioner, 55 T.C. 85, 92 (1970).                                         
               Because fraud can rarely be shown by direct proof of a                 
         taxpayer’s intention, it may be shown by means of circumstantial             
         evidence and reasonable inferences drawn from the facts.  Spies              
         v. United States, 317 U.S. 492 (1943); Bradford v. Commissioner,             
         supra; Stone v. Commissioner, 56 T.C. 213, 223-224 (1971).  The              
         taxpayer’s entire course of conduct may establish the requisite              
         fraudulent intent.  Stone v. Commissioner, supra.  Moreover, the             
         intent to conceal or mislead may be inferred from a pattern of               
         conduct.  Spies v. United States, supra at 499.                              




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