- 10 -
reduced to $24,266; the 1999 deficiency of $119,278 was reduced
to $87,662; and the 2000 deficiency of $75,531 was reduced to
$56,572. Thus, the aggregate reduction in petitioner’s total tax
due from the amount determined in the statutory notice of
deficiency was $107,142.
The submitted Forms 1040 tax returns for 1997 through 2000
assisted the tax resolution process by identifying claimed
deductions subject to substantiation, but they were not free from
material errors. For example, petitioner’s Form 1040, Schedule C
for 2000 reflected gross income from DSG and its related entities
of $61,655; the parties now agree the correct amount of gross
income was $198,990.9
OPINION
I. General Rules
Section 6651(f) imposes an addition to tax of up to 75
percent of the amount of tax required to be shown on the tax
return when the failure to file a Federal income tax return
timely is due to fraud.
In a case involving fraud, respondent bears the burden of
proof of establishing fraud with clear and convincing evidence.
Sec. 7454(a); Rule 142(b). There are two elements of fraud under
the Code: (1) Existence of an underpayment and (2) fraudulent
9 The record does not contain petitioner’s Forms 1040 for
1997 through 1999.
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