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V. Additions to Tax and Penalties
A. Whether Petitioner Is Liable for Fraud Penalties Under
Section 6663(a)
1. Background
Section 6663(a) imposes a penalty of “an amount equal to 75
percent of the portion of the underpayment which is attributable
to fraud.” Section 6663(b) specifies that if any portion of the
underpayment is attributable to fraud, the entire underpayment
shall be treated as attributable thereto except to the extent the
taxpayer establishes, by a preponderance of the evidence, that
some part is not due to fraud. Where taxpayers file a joint
return, section 6663 does not apply to a spouse unless some part
of the underpayment is due to the fraud of the spouse. Sec.
6663(c).
When asserting liability under the fraud penalty, the
Commissioner has the burden of proving, by clear and convincing
evidence, that (1) the taxpayer underpaid his income taxes for
each year, and (2) that some portion of the underpayment is due to
fraud. Sec. 7454(a); Rule 142(b); King’s Court Mobile Home Park,
Inc. v. Commissioner, 98 T.C. 511, 515-516 (1992); Truesdell v.
Commissioner, 89 T.C. 1280, 1301 (1987).
The existence of fraud is a question of fact to be resolved
from the entire record. DiLeo v. Commissioner, 96 T.C. 858, 874
(1991), affd. 959 F.2d 16 (2d Cir. 1992); Gajewski v.
Commissioner, 67 T.C. 181, 199 (1976), affd. without published
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Last modified: March 27, 2008