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she owned and deposited them into his checking account before
remitting them to his mother. When the examining agent was
unable to trace in petitioner’s bank records the rent payments
allegedly collected for and paid over to his mother, petitioner
then explained that the remittances to his mother were not
traceable because he occasionally used the rent receipts for
repairs to the properties and occasionally kept the payments when
he was short of cash, advising his mother that the tenants were
late in paying and then remitting the payments to her at a later
time.
To establish fraud, the Commissioner must show by clear and
convincing evidence that there is an underpayment and that a
portion of the underpayment is attributable to fraud. See sec.
7454(a); Rule 142(b); Petzoldt v. Commissioner, 92 T.C. 661, 699
(1989). If the Commissioner establishes that any portion of an
underpayment is attributable to fraud, the entire underpayment
shall be treated as attributable to fraud, except to the extent
the taxpayer establishes otherwise. See sec. 6663(b); Marretta
v. Commissioner, T.C. Memo. 2004-128; Peyton v. Commissioner,
T.C. Memo. 2003-146.
“Fraud is established by proving that the taxpayer intended
to evade tax believed to be owing by conduct intended to conceal,
mislead, or otherwise prevent the collection of such tax.”
Recklitis v. Commissioner, 91 T.C. 874, 909 (1988). The
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