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Penalties
A. Section 6663
Section 6663 imposes a penalty equal to 75 percent of the
portion of any underpayment which is attributable to fraud. Sec.
6663(a). The penalty in the case of fraud is a civil sanction
provided primarily as a safeguard for the protection of the
revenue and to reimburse the Government for the heavy expense of
investigation and the loss resulting from a taxpayer’s fraud.
Helvering v. Mitchell, 303 U.S. 391, 401 (1938). Fraud is
intentional wrongdoing on the part of the taxpayer with the
specific purpose to evade a tax believed to be owing. McGee v.
Commissioner, 61 T.C. 249, 256 (1973), affd. 519 F.2d 1121 (5th
Cir. 1975).
The Commissioner has the burden of proving fraud by clear
and convincing evidence. Sec. 7454(a); Rule 142(b). To satisfy
this 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 this burden
through affirmative evidence because fraud is never imputed or
presumed. Petzoldt v. Commissioner, 92 T.C. at 699; Recklitis v.
Commissioner, 91 T.C. 874, 909-910 (1988); Beaver v.
Commissioner, 55 T.C. 85, 92 (1970).
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