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checks and mail them cash during their vacations in Florida.
Mrs. Payne controlled HRDC’s books, which recorded the extras
separate from HRDC’s regular jobs. She attended a meeting with
Mr. Payne and Mr. Gunderson to discuss the preparation of
petitioners’ tax returns at which Mr. Gunderson was told that all
of HRDC’s receipts were deposited into the bank account. She
testified that she knew Mr. Gunderson had requested only bank
records to complete the returns, and she helped Ms. Enerson
gather information to send to Mr. Gunderson. Because we find
that Mrs. Payne filed the returns for 1993, 1994, and 1995
fraudulently, respondent did not abuse his discretion in denying
Mrs. Payne innocent spouse relief under section 6015(f).
VII. Fraud Penalty Under Section 6663
If respondent shows that any portion of an underpayment is
due to fraud, the entire underpayment will be treated as
attributable to fraud for purposes of the penalty under section
6663(a), except any portion of the underpayment that petitioner
establishes by a preponderance of the evidence is not
attributable to fraud. See sec. 6663(b); Knauss v. Commissioner,
T.C. Memo. 2005-6. As stated above, respondent has shown that
petitioners committed fraud in filing their 1993, 1994, and 1995
returns. However, petitioners have shown by a preponderance of
the evidence that their unreported bank deposits were not due to
fraud. Our finding of fraud relies in part on petitioners’
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