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I. Fraud Penalty
To sustain his determination of civil fraud, respondent must
show, by clear and convincing evidence, that petitioner intended
to evade taxes known or believed to be owing by conduct intended
to conceal, mislead, or otherwise prevent the collection of
taxes. Secs. 6663(b), 7454(a); Rule 142(b); see Stoltzfus v.
United States, 398 F.2d 1002, 1004 (3d Cir. 1968); Rowlee v.
Commissioner, 80 T.C. 1111, 1123 (1983).
The existence of fraud is a question of fact to be resolved
upon consideration of the entire record. Estate of Pittard v.
Commissioner, 69 T.C. 391 (1977); Gajewski v. Commissioner, 67
T.C. 181, 199-200 (1976), affd. without published opinion 578
F.2d 1383 (8th Cir. 1978). Fraud is not to be presumed or based
upon mere suspicion. Wainwright v. Commissioner, T.C. Memo.
1993-302 (citing Carter v. Campbell, 264 F.2d 930, 935 (5th Cir.
1959)). Because direct evidence of a taxpayer’s intent is rarely
available, however, fraud may be proven by circumstantial
evidence and reasonable inferences drawn from the facts. Spies
v. United States, 317 U.S. 492 (1943); Niedringhaus v.
Commissioner, 99 T.C. 202, 211 (1992); Otsuki v. Commissioner, 53
T.C. 96, 106 (1969).
Petitioner’s scheme to defraud the Kieffers was
reprehensible, but respondent has not convinced us that
petitioner had any specific intent to evade taxes. In this
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