-17-
Neidringhaus v. Commissioner, 99 T.C. 202, 219 (1992). In
addition, petitioners argue that a good friend of Mrs. Paterson
“loaned” her $50,000 because the memo notation on the check said
“loan-taxes.” Petitioners did not have the friend testify or
produce any documentation regarding this “loan.” The failure of
a party to introduce evidence which, if true, would be favorable
to that party gives rise to the presumption that the evidence
would be unfavorable if produced. Wichita Terminal Elevator Co.
v. Commissioner, 6 T.C. 1158, 1165 (1946), affd. 162 F.2d 513
(10th Cir. 1947). Petitioners have not proven that any of these
items are nontaxable deposits or are loans. Petitioners have
also introduced no evidence to support that Mrs. Paterson is
entitled to any additional expenses or losses.
In sum, we find that Mrs. Paterson had unreported income in
the amounts respondent determined in the deficiency notice.
II. Fraud Penalty
We next consider whether either petitioner is liable for the
fraud penalty for the years at issue. The Commissioner must
prove by clear and convincing evidence that the taxpayer
underpaid his or her income tax and that some part of the
underpayment was due to fraud. Sec. 6663(a); Clayton v.
Commissioner, 102 T.C. at 646. If the Commissioner establishes
that any portion of an underpayment is attributable to fraud, the
entire underpayment is treated as attributable to fraud, except
to the extent the taxpayer establishes by a preponderance of the
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