- 16 -
clear and convincing evidence. See sec. 7454(a); Rule 142(b);
Rowlee v. Commissioner, 80 T.C. 1111, 1113 (1983). Respondent
must prove that petitioners fraudulently intended to underpay
their tax. See Powell v. Granquist, 252 F.2d 56 (9th Cir. 1958);
Miller v. Commissioner, 94 T.C. 316, 332-333 (1990). Respondent
must meet his burden through affirmative evidence because fraud
is never imputed or presumed. See Beaver v. Commissioner, 55
T.C. 85, 92 (1970). Whether fraud exists in a given situation is
a factual determination that must be made after reviewing the
particular facts and circumstances of the case. DiLeo v.
Commissioner, 96 T.C. 858, 874 (1991), affd. 959 F.2d 16 (2d Cir.
1992).
If respondent establishes that some part of an underpayment
was due to fraud, the entire underpayment is treated as
attributable to fraud unless petitioners prove otherwise. Sec.
7(...continued)
payment of the tax.
(2) Determination of portion attributable to fraud.
If the Secretary establishes that any portion of an
underpayment is attributable to fraud, the entire
underpayment shall be treated as attributable to fraud,
except with respect to any portion of the underpayment
which the taxpayer establishes is not attributable to
fraud.
(3) Special rule for joint returns. In the case of
a joint return, this subsection shall not apply with
respect to a spouse unless some part of the underpayment
is due to the fraud of such spouse.
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