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Section 6663(a) provides that if any part of an underpayment
of tax required to be shown on an income tax return is due to
fraud, there shall be added to the tax an amount equal to 75
percent of the portion of the underpayment that is attributable
to fraud. The notice of deficiency determined that petitioner
was liable for the 75-percent penalty based on the entire
underpayment for each of the 3 taxable years in issue.
The Commissioner’s determinations are ordinarily presumed to
be correct, and generally the taxpayer bears the burden of
proving otherwise. Rule 142(a)(1); Welch v. Helvering, 290 U.S.
111, 115 (1933). However, this is not the case when fraud is
alleged. See sec. 7454(a). In that instance, the Commissioner
bears the burden of proving fraud by clear and convincing
evidence. Sec. 7454(a); Rule 142(b).
Fraud is defined as an intentional wrongdoing designed to
evade tax believed to be owing. Edelson v. Commissioner, 829
F.2d 828, 833 (9th Cir. 1987), affg. T.C. Memo. 1986-223;
Bradford v. Commissioner, 796 F.2d 303, 307 (9th Cir. 1986),
affg. T.C. Memo. 1984-601. Fraud is never presumed, but is a
question of fact to be resolved upon consideration of the entire
record. Gajewski v. Commissioner, 67 T.C. 181, 199 (1976), affd.
without published opinion 578 F.2d 1383 (8th Cir. 1978); see also
Beaver v. Commissioner, 55 T.C. 85 (1970).
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Last modified: November 10, 2007