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establishes (by a preponderance of the evidence) is not
attributable to fraud.”
As we noted, supra, in the notices of deficiency, respondent
determined that, in essence, every element of each year’s
underpayment was due to fraud. On brief, respondent’s fraud
contentions focus entirely on the unreported Schedule C gross
receipts. We treat this as respondent’s concession that the
fraud penalty applies only to so much of the underpayment as
results from the unreported Schedule C receipts. On the basis of
the preponderance of the evidence, we conclude that for each year
in issue the fraud penalty applies to all of the underpayment
that results from the unreported Schedule C receipts.
(2) In general, petitioners have the burden of proving, by a
preponderance of the evidence, that the deficiencies30 are less
than the amounts respondent determined in the notices of
deficiency. See Rule 142(a)(1); Welch v. Helvering, 290 U.S.
111, 115 (1933).31 However, respondent has the burden of proof
30 For purposes of the instant case, “deficiency” is the
same as “underpayment”. Compare sec. 6211(a) with sec. 6664(a).
31 Sec. 7491, which shifts the burden of proof to the
Commissioner if the taxpayer meets certain conditions, does not
apply in the instant case because the examination of petitioners’
tax returns began in 1996 or 1997, before the July 22, 1998,
effective date of sec. 7491. Internal Revenue Service
Restructuring and Reform Act of 1998, Pub. L. 105-206, sec.
3001(a), 112 Stat. 726.
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