Michael and Penny Rhodes - Page 16

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               The final issue is whether Ms. Rhodes6 is liable for fraud             
          under section 6663(a)7 for the years at issue.  Respondent has              
          the burden of proving by clear and convincing evidence that (1)             
          Ms. Rhodes underpaid her tax each year at issue, and (2) that               
          some part of the underpayment is due to fraud.  Sec. 6663(a);               
          Parks v. Commissioner, 94 T.C. 654, 660-661 (1990).                         
               Fraud means actual, intentional wrongdoing, and the intent             
          required is the specific purpose to evade a tax believed to be              
          owing.  Candela v. United States, 635 F.2d 1272 (7th Cir. 1980);            
          Stoltzfus v. United States, 398 F.2d 1002, 1004 (3d Cir. 1968);             
          Mitchell v. Commissioner, 118 F.2d 308 (5th Cir. 1941), revg. 40            

               6As previously noted, respondent conceded at trial that Mr.            
          Rhodes was not liable for the sec. 6663(a) penalty for the 2                
          years at issue.                                                             
               7Sec. 6663 provides:                                                   
                  SEC. 6663. IMPOSITION OF FRAUD PENALTY                              
                     (a) Imposition of Penalty.--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.                        
                     (b) Determination of Portion Attributable to                     
                  Fraud.--If the Secretary establishes that any                       
                  portion of an underpayment is attributable to fraud,                
                  the entire underpayment shall be treated as                         
                  attributable to fraud, except with respect to any                   
                  portion of the underpayment which the taxpayer                      
                  establishes (by a preponderance of the evidence) is                 
                  not attributable to fraud.                                          
                     (c) Special Rule for Joint Returns.--In the case                 
                  of a joint return, this section shall not apply with                
                  respect to a spouse unless some part of the                         
                  underpayment is due to the fraud of such spouse.                    

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