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6653(b)(2). The fraud penalty may be applied against a spouse
only where some part of the underpayment is due to the fraud of
the spouse. Sec. 6653(b)(3).
A. Underpayment of Tax
Mr. Ford has acknowledged under oath and while represented
by counsel that petitioners’ 1986 return does not report all of
their income for 1986 and that this unreported income was subject
to significant Federal income tax. This testimony conclusively
establishes the existence of a knowing underpayment by
petitioners. See Considine v. United States, 683 F.2d 1285, 1287
(9th Cir. 1982).
B. Intent To Evade Tax
Fraudulent intent may be proven by circumstantial evidence
because direct proof of a taxpayer’s intent is rarely available.
Reasonable inferences may be drawn from the relevant facts.
Spies v. United States, 317 U.S. 492, 499 (1943); Stephenson v.
Commissioner, 79 T.C. 995 (1982), affd. 748 F.2d 331 (6th Cir.
1984). Fraud requires a clear and convincing showing that the
taxpayer intended to evade a tax known or believed to be owing by
conduct intended to conceal, mislead, or otherwise prevent the
collection of tax. Stoltzfus v. United States, 398 F.2d 1002,
1004 (3d Cir. 1968). While a conviction under section 7206(1)
does not, in and of itself, establish fraudulent intent, it is a
factor from which we “may properly infer fraud” where it is
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