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IV. Fraud Penalty--Section 6663
Section 6663(a) provides that “If any part of any
underpayment of tax required to be shown on a return is due to
fraud, there shall be added to the tax an amount equal to 75
percent of the portion of the underpayment which is attributable
to fraud.” The Commissioner bears the burden of proving fraud by
clear and convincing evidence. Sec. 7454(a); Rule 142(b). The
Commissioner cannot satisfy his burden of proving fraud by
relying upon the taxpayer’s failure to establish error in the
determination of deficiencies. Parks v. Commissioner, 94 T.C. at
660-661. To prove fraud, the Commissioner must establish that
(1) an underpayment exists and (2) some portion of the
underpayment is attributable to fraud. DiLeo v. Commissioner, 96
T.C. at 873.
As stated supra, we find that respondent has clearly and
convincingly proven that petitioner received and failed to report
income from his farming business in 1990, 1991, and 1992. If the
Commissioner proves that any portion of an underpayment of tax is
attributable to fraud, the entire underpayment shall be treated
as attributable to fraud, except that when the taxpayer
establishes by a preponderance of the evidence that any portion
of the underpayment was not attributable to fraud, the fraud
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