Frank H. and Marla C. Black - Page 18

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               The Commissioner has the burden of proving fraud by clear              
          and convincing evidence.  Sec. 7454(a); Rule 142(b).                        
          Respondent’s burden of proof under section 6501(c)(1) is the same           
          as that imposed by section 6663.  See Schaffer v. Commissioner,             
          779 F.2d 849, 857 (2d Cir. 1985), affg. in part and remanding in            
          part Mandina v. Commissioner, T.C. Memo. 1982-34.                           
          A. Proof of an Underpayment                                                 
               To satisfy the Commissioner’s burden, the Commissioner must            
          show:  (1) An underpayment exists; and (2) the taxpayer intended            
          to evade taxes known to be owing by conduct intended to conceal,            
          mislead, or otherwise prevent the collection of taxes.  Parks v.            
          Commissioner, 94 T.C. 654, 660-661 (1990).  The Commissioner must           
          meet that burden through affirmative evidence because fraud is              
          never imputed or presumed.  Petzoldt v. Commissioner, 92 T.C.               
          661, 699 (1989).  If the Commissioner establishes that any                  
          portion of an underpayment in a particular year is attributable             
          to fraud, the entire underpayment is 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.  Sec. 6663(b).                      
               Respondent used the net worth method to establish                      
          petitioners’ income and the fact of an underpayment.  Under the             
          net worth method, taxable income is computed by reference to the            

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