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C. Whether Petitioner Is Liable for Fraud Under Section 6663(a)
1. Background
Respondent contends that petitioner is liable for the
penalty for fraud under section 6663(a) for 1993-95. Fraud is
actual, intentional wrongdoing designed to evade a tax believed
to be owing. Webb v. Commissioner, 394 F.2d 366, 377 (5th Cir.
1968), affg. T.C. Memo. 1966-81. To prevail, the Commissioner
must prove by clear and convincing evidence: (a) Petitioner
underpaid tax for each year in issue, and (b) some part of the
underpayment is due to fraud. Secs. 6663(b), 7454(a); Rule
142(b); Parks v. Commissioner, 94 T.C. at 660-661; Petzoldt v.
Commissioner, 92 T.C. 661, 699 (1989). If respondent shows that
any part of an underpayment is due to fraud, the entire
underpayment is treated as due to fraud unless the taxpayer shows
by a preponderance of the evidence that part of the underpayment
is not due to fraud. Sec. 6663(b).
The fact that petitioner failed to meet his burden of proof
on the underlying deficiencies in this case does not relieve
respondent of the burden to prove, by clear and convincing
evidence, both elements of fraud. Fairchild v. United States,
240 F.2d 944, 947 (5th Cir. 1957); Olinger v. Commissioner, 234
F.2d 823 (5th Cir. 1956), affg. in part and revg. in part T.C.
Memo. 1955-9; Drieborg v. Commissioner, 225 F.2d 216, 218 (6th
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