Opinion ID: 243983
Heading Depth: 2
Heading Rank: 1

Heading: Proving Fraud

Text: 78 The Tax Court sustained the penalties imposed against the taxpayer. 22 All these penalties, except those for the years 1950 and 1951, would be barred, unless there was fraud, in which event the statutes of limitation do not apply. 23 The burden of proving fraud before the Tax Court is upon the Commissioner. 24 The attitude of the Federal Courts of Appeals in determining the quantum of proof necessary to sustain a finding of fraud, following the decision of the Supreme Court in Holland v. United States, 25 is well summed up by the Court of Appeals for the Sixth Circuit: 79 The question whether an understatement of income is due to fraud is a question of fact. While fraud is never presumed but must be established by clear and convincing evidence and there must be an intention to defraud, Kashat v. Commissioner of Internal Revenue, 6 Cir., 229 F.2d 282; Drieborg v. Commissioner of Internal Revenue, 6 Cir., 225 F.2d 216; Section 1112, Internal Revenue Code, we think this burden is clearly sustained by the discrepancies between real net income and reported income for so many years. Consistent, substantial understatements of income for several years, as was true here, is highly persuasive evidence of intent to defraud the government. Rogers v. Commissioner of Internal Revenue, 6 Cir., 111 F.2d 987. See also Holland v. United States, 348 U.S. 121, 75 S.Ct. 127, 137, 99 L.Ed. 150, which held that `evidence of a consistent pattern of underreporting large amounts of income' will support `an inference of willfulness.' 26 80 Other Courts of Appeals have expressed the view that discrepancy between real and reported income for a number of years alone is strong evidence of an attempt to evade taxes which satisfies the clear and convincing concept and warrants the imposition of fraud penalties. 27 81