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For 1985, section 6653(b)(1) imposes an addition to tax
equal to 50 percent of a tax underpayment if any portion of the
underpayment is due to fraud, and section 6653(b)(2) imposes
another addition to tax equal to 50 percent of the interest with
respect to the portion of an underpayment attributable to fraud.
For 1986, section 6653(b)(1)(A) imposes an addition to tax
equal to 75 percent of the tax underpayment attributable to
fraud, and section 6653(b)(1)(B) imposes a separate addition to
tax, equal to 50 percent of the interest payable under section
6601, on the portion of an underpayment attributable to fraud.
Further, for 1986, if fraud is established with respect to
any portion, under section 6653(b)(2) the entire underpayment is
to be treated as attributable to fraud, except to the extent the
taxpayer establishes that some portion of the underpayment is not
attributable to fraud.
For purposes of section 6653(b), fraud is defined as an
intentional wrongdoing designed to evade tax believed to be owed.
Powell v. Granquist, 252 F.2d 56 (9th Cir. 1958); Mitchell v.
Commissioner, 118 F.2d 308 (5th Cir. 1941), revg. 40 B.T.A. 424
(1939); Petzoldt v. Commissioner, 92 T.C. at 698; Estate of
Pittard v. Commissioner, 69 T.C. 391 (1977).
Respondent bears the burden of proving each of the elements
of fraud by clear and convincing evidence – an intent to evade
tax and an underpayment of tax. Sec. 7454(a); Rule 142(b);
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