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capital; thus, the settlement payments from Darling Yachts, Inc.,
are taxable income, and respondent’s determination is sustained.
See id.
Net Operating Loss Carryback
Respondent determined that the adjustments determined for
petitioner’s 1994 taxable year eliminated the net operating loss
that had been carried back from that year to 1991. As a
consequence, respondent determined a deficiency of $4,323 for
1991. See Pesch v. Commissioner, 78 T.C. 100 (1982).
Respondent’s deficiency determination for 1994 has been
sustained, thereby eliminating any net operating loss for that
year. As a consequence, the deficiency determined for 1991 is
also sustained. See id.; Toussaint v. Commissioner, T.C. Memo.
1984-25, affd. 743 F.2d 309 (5th Cir. 1984).
Fraud
Respondent determined that the underpayments of tax on
petitioner’s 1994, 1995, 1996, and 1997 returns, as well as his
amended return for 1991, were due to fraud. To establish fraud,
the Commissioner must show by clear and convincing evidence that
there is an underpayment and that a portion of the underpayment
is attributable to fraud. See sec. 7454(a); Rule 142(b);
Petzoldt v. Commissioner, 92 T.C. 661, 699 (1989). If the
Commissioner establishes that any portion of an underpayment is
attributable to fraud, the entire underpayment shall be treated
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