- 24 -
The very uncertainty as to Louisiana law that leads us to
conclude that the Commissioner’s position on income-splitting was
substantially justified, also leads us to conclude that
respondent would have had to present an extraordinarily strong
case to persuade us by clear and convincing evidence that Sandra
believed her marriage contract filing was ineffective under
Louisiana law. See Danenberg v. Commissioner, supra at 393-394.
We have not found any evidence in the record, nor any
evidence that respondent offered or otherwise contended was
admissible, that would suggest that it was reasonable for
respondent to believe that respondent could prove this essential
element of a fraud case against Sandra. Indeed, respondent’s
discussion in the memorandum on Sandra’s motion for costs deals
only with Sandra’s involvement in the record-keeping and
reporting regarding Michael’s business; it does not suggest, even
by way of a conclusory comment, that respondent expected to prove
by clear and convincing evidence that Sandra knew or believed
that Sandra had to report any omitted income from Michael’s
business.
We conclude that respondent failed to establish that
respondent’s position as to Sandra’s civil fraud penalty was
substantially justified.
However, respondent’s failure to carry the heavy burden of
proof as to the 75-percent civil fraud penalty would have left in
Page: Previous 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 NextLast modified: May 25, 2011