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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Last modified: March 27, 2008