- 24 -
professional fees which were loan repayments to Davoli and
Pekas.7
Respondent has the burden of proving fraud by clear and
convincing evidence. See sec. 7454(a); Rule 142(b). Respondent
must establish that: (a) Petitioner underpaid tax for 2000, and
(b) some part of the underpayment is due to fraud. See sec.
6653(b). 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. See sec. 6663(b).
Fraud is the intentional evasion of a tax believed to be
owing. Webb v. Commissioner, 394 F.2d 366, 377 (5th Cir. 1968),
affg. T.C. Memo. 1966-81. Fraud is never presumed; it must be
established by affirmative evidence. Beaver v. Commissioner, 55
T.C. 85, 92 (1970).
2. Badges of Fraud
Courts have developed several objective indicators, or
“badges”, of fraud. Recklitis v. Commissioner, 91 T.C. 874, 910
(1988). The following badges of fraud are present in this case
as to petitioner for 2000: (a) Creating a false document; (b)
deducting the same item several times; (c) giving implausible or
inconsistent explanations to respondent’s examiner and in court
7 We discuss respondent’s other contentions relating to
fraud at par. E-3, below.
Page: Previous 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 NextLast modified: May 25, 2011