Andrew Chook - Page 9

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          II. Fraud Penalty Under Section 6663(a)                                     
               Section 6663(a) provides:  “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.”  The           
          Commissioner bears the burden of proving by clear and convincing            
          evidence that an underpayment of tax was attributable to fraud.             
          Sec. 7454(a); Rule 142(b).  The Commissioner may satisfy this               
          burden by relying on deemed admissions.  Marshall v.                        
          Commissioner, 85 T.C. 267, 272-273 (1985); Doncaster v.                     
          Commissioner, 77 T.C. 334, 336-337 (1981).                                  
               Petitioner was deemed to have admitted that he underpaid the           
          tax required to be shown on his 2002 return and that the                    
          underpayment was attributable to fraud.  These deemed admissions            
          are sufficient for respondent to carry his burden of proving by             
          clear and convincing evidence that petitioner’s underpayment of             
          tax was attributable to fraud.  See Marshall v. Commissioner,               
          supra at 272-273; Doncaster v. Commissioner, supra at 336-337.              
          Additionally, petitioner kept no books or records and failed to             
          cooperate in the audit of his return, both of which are indicia             
          of fraud.  See, e.g., Bradford v. Commissioner, 796 F.2d 303, 308           
          (9th Cir. 1986), affg. T.C. Memo. 1984-601; Smith v.                        
          Commissioner, 91 T.C. 1049, 1059-1060 (1988), affd. 926 F.2d 1470           







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