- 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 byPage: 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