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C. Section 6653(b)(2) Addition to Tax for 1985
With respect to the section 6653(b)(2) addition to tax for
1985, it is respondent’s burden to establish, by clear and
convincing evidence, the specific portion of the underpayment
which is attributable to fraud. Hughes v. Commissioner, T.C.
Memo. 1994-139; Franklin v. Commissioner, T.C. Memo. 1993-184.
Pursuant to our discussion above, respondent has proven by
clear and convincing evidence that petitioner received taxable
income of $305,940 and that petitioner is liable for self-
employment tax of $4,763 for 1985. For purposes of section
6653(b)(2), respondent has proven by clear and convincing
evidence an underpayment for 1985, which the parties shall
compute under Rule 155 on the basis of our findings and
conclusions.
Respondent has proven by clear and convincing evidence that
petitioner failed to report substantial gains and other income
from his real estate transactions and that he did so with
fraudulent intent. Petitioner was an experienced real estate
developer and businessman. We are convinced that he knew those
items were taxable as income when received. Indeed, petitioner
was informed during the examination of his 1983 and 1984 returns,
which occurred prior to the time petitioner filed his 1985
through 1988 returns, that the sale proceeds deposited into the
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