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the distributions that petitioners received from Wright &
Associates but failed to include in their income. In addition,
respondent has met his burden of disproving an alleged nontaxable
source for the $54,000 petitioners deposited into their offshore
bank account in 1999. Mr. Wright initially alleged that the
$54,000 deposited into petitioners’ Leadenhall bank account in
1999 was nontaxable as it was a loan. He claimed at trial that
the $54,000 was in fact petitioners’ money but was nontaxable.
He also claimed that the $54,000 was sent to Mr. Jones and that
Mr. Jones deposited it into petitioners’ Leadenhall bank account.
Mr. Wright’s numerous explanations are inconsistent.
Accordingly, the Court concludes that respondent has proved by
clear and convincing evidence an underpayment of tax--the first
prong of the fraud test--for each of the years 1999, 2000, and
2001.
2. Fraudulent Intent
To satisfy the second prong of the fraud test, respondent
must show that a portion of the underpayment is attributable to
fraud. For the purposes of section 6663, fraud, which presents a
question of fact, is defined as intentional wrongdoing by the
taxpayer with the specific purpose of avoiding a tax believed to
be owed. Fraud includes conduct intended to conceal, mislead, or
otherwise prevent the collection of such tax. Stoltzfus v.
United States, 398 F.2d 1002, 1004 (3d Cir. 1968); Recklitis v.
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