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as attributable to fraud, except that portion which the taxpayer
establishes by a preponderance of the evidence is not
attributable to fraud. See sec. 6663(b); Marretta v.
Commissioner, T.C. Memo. 2004-128; Peyton v. Commissioner, T.C.
Memo. 2003-146.
Underpayment
We conclude that respondent has shown the existence of an
underpayment in each year by clear and convincing evidence. With
respect to 1994, petitioner has admitted that he failed to report
$41,202 in gross income from his charter business. Had this
amount been reported, it would have eliminated the net operating
loss that petitioner carried back to 1991. As a consequence, the
underpayment for 1991 has also been established under a clear and
convincing standard. See Toussaint v. Commissioner, supra. With
respect to 1995, petitioner has admitted that he failed to report
charter business gross income of $182,812 and income from a
finder’s fee of $85,119.
With respect to 1996 and 1997, we have found that petitioner
failed to demonstrate error in respondent’s determination that he
understated the gain from the sale of yachts in those years by
$527,074 and $615,119, respectively. While a mere failure by
petitioner to show error in respondent’s determination is not a
sufficient basis for fraud, Petzoldt v. Commissioner, supra at
700; Habersham-Bey v. Commissioner, 78 T.C. 304, 312 (1982);
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