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section 6501(c)(1). They argue that Mr. Thompson was liable for
fraud because he had claimed Kersting deductions even though he
believed he wouldn’t have to pay the notes.
Petitioners’ arguments are farfetched. Allegations of fraud
are serious business. The grounds for asserting civil fraud were
succinctly explained in Webb v. Commissioner, 394 F.2d 366, 377
(5th Cir. 1968) (quoting Carter v. Campbell, 264 F.2d 930,
935-936 (5th Cir. 1959)), affg. T.C. Memo. 1966-81:
“Fraud implies bad faith, intentional wrongdoing and a
sinister motive. It is never imputed or presumed and
the court should not sustain findings of fraud upon
circumstances which at most create only suspicion.
* * * Negligence, whether slight or great, is not
equivalent to the fraud with intent to evade tax
named in the statute. The fraud meant is actual,
intentional wrongdoing, and the intent required is the
specific purpose to evade a tax believed to be owing.
Mere negligence does not establish either. * * * ”
We amplified these requirements in Fields v. Commissioner, T.C.
Memo. 2002-320:
To succeed in the instant case, respondent must
show that he had a reasonable basis for believing that
he could prove his allegation of petitioner’s fraud by
clear and convincing evidence. See, e.g., Rutana v.
Commissioner, 88 T.C. 1329, 1337-1338 (1987). More
particularly, he must show that he had a reasonable
basis for believing that he could prove by clear and
convincing evidence that petitioner willfully intended
to evade a tax she believed to be owing.
In Fields, where we found that respondent lacked a reasonable
basis for asserting fraud, we awarded attorney’s fees to the
petitioner under section 7430. See also Benson v. Commissioner,
T.C. Memo. 2004-272.
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