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K & M’s 1995 Gross Income Taxable Income Tax Liability
As Stipulated $1,768,971 $112,875 $27,271
As Reported 1,705,359 7,361 1,104
Understatement $ 63,612 $105,514 $26,167
% Understatement 4% 93% 96%
K & M’s 1996
As Stipulated $1,492,929 $202,839 $62,357
As Reported 1,401,793 60,148 10,037
Understatement $ 91,136 $142,691 $52,320
% Understatement 6% 70% 84%
OPINION
Respondent has the burden of proving by clear and convincing
evidence that Ahmed for 1995, 1996, and 1997, and that K & M for
1995 and 1996 are liable for the civil fraud penalty under
section 6663. Sec. 7454(a); Rule 142(b); Akland v. Commissioner,
767 F.2d 618, 621 (9th Cir. 1985), affg. T.C. Memo. 1983-249.
Respondent also has the burden of proving by clear and
convincing evidence that Ahmed for 1998 fraudulently failed to
timely file his individual Federal income tax return. Sec.
6651(f). For this purpose, we consider the same factors under
section 6651(f) that are considered in imposing the fraud penalty
under section 6663. Clayton v. Commissioner, 102 T.C. 632, 653
(1994).
The general elements of tax fraud that respondent must prove
under sections 6663 and 6651(f) for each year for which fraud is
asserted are: (1) An underpayment of tax; and (2) a specific
intent to evade a tax known or believed to be owed. Bagby v.
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