- 18 -
his return a letter purporting to substantiate the deduction.
The letter was falsified. During the pendency of this case,
petitioner submitted another letter from a different lawyer
purporting to substantiate the deduction. That letter was also
falsified. The record contains no other document to substantiate
the expense. Respondent properly disallowed the deduction.
IV. Fraud Penalty
Section 6663 authorizes the Commissioner to impose a 75-
percent penalty on a taxpayer if any part of an underpayment is
due to fraud. The Commissioner must prove a taxpayer’s liability
for the fraud penalty by clear and convincing evidence. Sec.
7454(a); Rule 142(b).
In order for the Commissioner to prove that a taxpayer is
liable for the fraud penalty, he must establish that (1) an
underpayment of tax exists, and (2) some part of the underpayment
is due to fraud. DiLeo v. Commissioner, 96 T.C. 858, 873 (1991),
affd. 959 F.2d 16 (2d Cir. 1992). Fraud is established by
showing that the taxpayer intended “to evade tax believed to be
owing by conduct intended to conceal, mislead, or otherwise
prevent the collection of such tax.” Recklitis v. Commissioner,
91 T.C. 874, 909 (1988).
The existence of fraud is a question of fact to be resolved
upon consideration of the entire record. DiLeo v. Commissioner,
supra at 874. Fraud is never presumed and must be established by
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011