Elizabeth Lai - Page 19

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               The Commissioner must prove that a portion of the                      
          underpayment for each taxable year in issue was due to fraud.               
          Profl. Servs. v. Commissioner, 79 T.C. 888, 930 (1982).  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).                                                               
               The existence of fraud is a question of fact to be resolved            
          from the entire record.  Gajewski v. Commissioner, 67 T.C. 181,             
          199 (1976), affd. without published opinion 578 F.2d 1383 (8th              
          Cir. 1978).                                                                 
               Respondent has failed to meet his heavy burden of                      
          establishing by clear and convincing evidence that petitioner had           
          the requisite fraudulent intent for any of the years at issue.              
          Several aspects of petitioner’s conduct are markedly inconsistent           
          with fraudulent intent.  At her first meeting with Agent                    
          Cedergreen, petitioner voluntarily disclosed the existence of her           
          personal accounts, the very accounts in which respondent alleges            
          that she hid her income.  When petitioner discovered that the               
          first set of letters she had presented were not originals, she              
          disclosed that information to respondent.  Petitioner also freely           
          disclosed her unreported tip income and that she had cash                   

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