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A. Fraudulent Failure To File Returns
Individuals whose gross income exceeds certain levels for a
taxable year are required to file an income tax return. Sec.
6012(a). If an individual fails to file an income tax return,
the Commissioner may impose an addition to tax up to 5 percent
per month of the amount required to be shown as tax, up to a
maximum of 25 percent. Sec. 6651(a)(1). If the failure to file
is fraudulent, the addition to tax is 15 percent per month of the
amount required to be shown as tax up to a maximum of 75 percent.
Sec. 6651(f).
The record reflects that petitioners did not file timely
income tax returns for the years at issue. In fact, the record
reflects that petitioners, as of the trial date, have yet to file
their returns for the years at issue. We must determine whether
their failure to file timely was fraudulent within the meaning of
section 6651(f).
In determining whether a taxpayer’s failure to file is
fraudulent, we consider the same elements that are considered in
imposing the fraud penalty under section 6663. Clayton v.
Commissioner, 102 T.C. 632, 653 (1994). Fraud is an intentional
wrongdoing designed to evade tax known or believed to be owing.
Edelson v. Commissioner, 829 F.2d 828, 833 (9th Cir. 1987), affg.
T.C. Memo. 1986-223; Bradford v. Commissioner, 796 F.2d 303, 307
(9th Cir. 1986), affg. T.C. Memo. 1984-601. Respondent has the
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