                        T.C. Memo. 1996-366


                      UNITED STATES TAX COURT



               FREDERICK E. SLATER, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos. 16898-94, 16899-94.     Filed August 12, 1996.


     Harry J. Kaplan, for petitioner.

     William D. Reese, for respondent.



                        MEMORANDUM OPINION


     RAUM, Judge:   The Commissioner determined deficiencies in

petitioner's Federal income taxes as follows:
                                   - 2 -

                                         Additions to Tax
Year         Deficiency       Sec. 6653(b)(1)1         Sec. 6661

1985         $ 58,899              $ 73,4072             $14,725

1986           82,667               103,0293              20,667

1987          104,190               118,5594              25,848

This matter is before the Court on the respondent's Motion for

Summary Judgment.       Unless otherwise indicated, all section

references are to the Internal Revenue Code in effect for the




       1
        Sec. 6653(b) above refers to both sec. 6653(b)(1) and
(b)(2), which was in effect in 1985, and to sec. 6653(b)(1)(A)
and (b)(1)(B), which was in effect in 1986 and 1987.

       Sec. 6653(b)(1) provided:

       If any part of any underpayment (as defined in
       subsection (c)) of tax required to be shown on a return
       is due to fraud, there shall be added to the tax an
       amount equal to 50 percent of the underpayment.

       Sec. 6653(b)(1)(A) provided:

       If any part of any underpayment (as defined in
       subsection (c)) of tax required to be shown on a return
       is due to fraud, there shall be added to the tax an
       amount equal to the sum of * * * (A) 75 percent of the
       portion of the underpayment which is attributable to
       fraud * * * .

Both provisions require that 50 percent of the interest payable
under sec. 6601 is due with respect to that portion of the
understatement attributable to fraud. Secs. 6653(b)(2)(A),
6653(b)(2).

       2
           Plus 50 percent of the interest due on $58,899
       3
           Plus 50 percent of the interest due on $82,667.
       4
           Plus 50 percent of the interest due on $103,392.
                                - 3 -

years in issue and all Rule references are to the Tax Court Rules

of Practice and Procedure.

     Petitioner, Frederick E. Slater, resided in Saratoga,

California, at the time the petition in this case was filed.      On

February 18, 1992, the grand jury of Santa Clara County,

California, indicted petitioner on three counts of violation of

26 U.S.C. section 7201 (1982) for each of the years 1985, 1986,

and 1987.   In each count, the grand jury charged petitioner with

willfully attempting to evade income tax liability by

underreporting the amount of taxes knowingly owed.    On November

17, 1992, petitioner was found guilty on all three counts of the

indictment.    He was sentenced to 4 months' imprisonment and 2

years of supervised release, including 4 months of electronic

home detention, and fined $2,300 and "the cost of prosecution in

this case", $2,231.

     After termination of the criminal proceeding, the IRS

attempted to conduct a civil audit of petitioner's income tax

returns for the years 1985, 1986, and 1987.    Petitioner, through

his then-attorney, refused to provide books and records to the

auditors and asked that the notice of deficiency be issued

immediately.    After the present Tax Court cases were docketed,

petitioner supplied the books and records to the IRS Appeals

Office.

     The parties have stipulated that the deficiencies in income

tax due from petitioner for 1985, 1986, and 1987 are $614,
                                - 4 -

$3,781, and $10,224, respectively.      The parties also agree that

there are no additions to tax due from petitioner pursuant to

section 6661 for 1985 and 1986.

1.   Section 6653(b)

      Section 6653(b) imposes additions to tax on taxpayers who

fraudulently understate their income tax liability.5     The

Government has the burden of proving fraud by clear and

convincing evidence.    Rule 142(b).    It has met that burden in

this case with proof of Slater's convictions for tax evasion

under section 72016 for each of the years at issue.     See Blohm v.

Commissioner, 994 F.2d 1542, 1554 (11th Cir. 1993), affg. T.C.

Memo. 1991-636.

      The Double Jeopardy Clause of the Fifth Amendment to the

United States Constitution states "nor shall any person be

subject for the same offence to be twice put in jeopardy of life

or limb."    Petitioner contends that imposition of the fraud

additions, when coupled with the prison time he has served and

the fines he has paid, violates the double jeopardy provisions of

      5
          See note 1.
      6
          Sec. 7201 provides:

           Any person who willfully attempts in any manner to
      evade or defeat any tax imposed by this title or the
      payment thereof shall, in addition to other penalties
      provided by law, be guilty of a felony and, upon
      conviction thereof, shall be fined not more than
      $100,000 ($500,000 in the case of a corporation), or
      imprisoned not more than 5 years, or both, together
      with the costs of prosecution.
                                - 5 -

the Fifth Amendment.    Petitioner's contentions have been recently

addressed and rejected in Louis v. Commissioner, T.C. Memo. 1996-

257, and Ward v. Commissioner, T.C. Memo. 1995-286.    Without

recanvassing our complete analysis of the problem in Louis, we

think it is sufficient to note that we there called attention to

a very recent Ninth Circuit case that dealt with the issue,

Grimes v. Commissioner, 82 F.3d 286, 289-290 (9th Cir., Apr. 17,

1996), where it was stated:

     Grimes argues that the imposition of fraud penalties
     renders the proceeding quasi-criminal. Two recent
     Supreme Court cases addressing the definition of
     "punishment" for the purposes of the Double Jeopardy
     Clause give this argument a superficial appeal. See
     Department of Revenue v. Kurth Ranch,     U.S.     ,
     , 114 S. Ct. 1937, 1948 (1994) (finding that a Montana
     state tax on marijuana constitutes punishment); United
     States v. Halper, 490 U.S. 435 (1989) (the "civil"
     label does not determine whether a sanction is
     punishment).

           Both of these decisions, however, cite with
      approval Helvering v. Mitchell, [38-1 USTC ¶ 9152], 303
      U.S. 391 (1938), where the Court found the Tax Code's
      civil fraud penalty remedial in nature and not punitive
      for double jeopardy purposes. See Kurth Ranch,
      U.S.    ,    , 114 S. Ct. at 1946 n. 16; Halper, 490
      U.S. at 442-43 * * * [Fn. ref. omitted.]

And the Sixth Circuit even more recently reached the same result.

United States v. Alt, 83 F.3d 779 (6th Cir., May 15, 1996).      We

reject petitioner's double jeopardy argument.

2.   Section 6661

      The only year now in controversy to which section 6661

applies is 1987.    Section 6661 provides:
                                    - 6 -

     (a) * * * If there is a substantial understatement of
     income tax for any taxable year, there shall be added
     to the tax an amount equal to 25 percent of the amount
     of any underpayment attributable to such
     understatement.

     (b)(1)(A) * * * For purposes of this section, there is
     a substantial understatement of income tax for any
     taxable year if the amount of the understatement for
     the taxable year exceeds the greater of

          (i) 10 percent of the tax required to be shown on
          the return for the taxable year, or

          (ii)   $5,000.

                    *      *    *     *     *   *    *

     (b)(2)(B) * * * The amount of the understatement under
     subparagraph (A) shall be reduced by that portion of
     the understatement which is attributable to

          (i) the tax treatment of any item by the taxpayer
          if there is or was substantial authority for such
          treatment, or

          (ii) any item with respect to which the relevant
          facts affecting the item's tax treatment are
          adequately disclosed in the return or in a
          statement attached to the return.

Petitioner has stipulated that he understated his income tax

liability for 1987 by $10,224.       The correct liability, as agreed

by the parties, was $28,954.        Ten percent of $28,954 is $2,895.

The amount of the understatement, $10,224, exceeds the greater of

$2,895 or $5,000.       Therefore, under section 6661(b)(1)(A), there

has been a substantial understatement.

     Petitioner does not dispute that there was a substantial

understatement of tax on his return for 1987.       However, he makes

two arguments against imposition of the section 6661(a) addition.
                                 - 7 -

First, he contends that imposition of the addition to tax results

in double jeopardy.    This Court has already decided that double

jeopardy does not apply to section 6661(a) additions imposed

after criminal conviction pursuant to section 7201.        See Miller

v. Commissioner, T.C. Memo. 1994-249.

     Petitioner's second argument is hard to follow in the light

of section 6661(b).    He states that his understatement "was the

result of a failure of proof as to items of deductions that arose

from improper record keeping."    At most petitioner appears to be

stating that he would have been entitled to additional deductions

upon substantiation.   However, even if one should accept

petitioner's statement as a factual matter, he still would not

have a valid defense against the section 6661 addition to tax,

and there would not be any genuine issue of triable material fact

in this connection.

                                              An order will be issued

                                         granting respondent's motion

                                         for summary judgment and

                                         decisions will be entered

                                         under Rule 155.
