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in section II.C.1. and 3. above are deductible by SCC, and (3)
the items we have determined have no benefit to Mr. Strong in
this section. IV. Penalties and Additions to Tax
A. Fraud Penalty Under Section 6663--Mr. Strong
Respondent determined that Mr. Strong is liable for the
fraud penalty under section 6663 for each of the years 1990,
1991, 1992, 1993, and 1994. Respondent must show by clear and
convincing evidence that Mr. Strong fraudulently intended to
underpay his taxes in each year in issue in order to prove that
he is liable for the fraud penalty under section 6663. See sec.
7454(a); Rule 142(b); Rowlee v. Commissioner, 80 T.C. 1111, 1113
(1983). For Federal tax purposes, fraud entails intentional
wrongdoing with the purpose of evading a tax believed to be
owing. See Neely v. Commissioner, 85 T.C. 934, 947 (1985). In
order to show fraud, respondent must prove: (1) An underpayment
exists and (2) Mr. Strong intended to evade taxes known to be
owing by conduct intended to conceal, mislead, or otherwise
prevent the collection of taxes. See Parks v. Commissioner, 94
T.C. 654, 660-661 (1990).
1. Underpayment
We have found above that SCC received construction income in
each of the years 1990-94 and that Mr. Strong used most of the
construction income for his personal expenses. Neither SCC nor
Mr. Strong paid Federal income tax on the additional construction
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