                  T.C. Memo. 1996-204



                UNITED STATES TAX COURT



            JAMES ALAN PRICE, Petitioner v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 23802-93.                    Filed April 29, 1996.



     In 1985, 1986, and 1987, P engaged in various tax
protester activities, filed false Forms W-4, and did
not file tax returns. R determined that P is liable
for the addition to tax for fraud for those years. P
was convicted of income tax evasion under I.R.C. sec.
7201 for 1986 and willful failure to file under I.R.C.
sec. 7203 for 1987.

     P contends that imposition of the addition to
tax for fraud violates his right not to be subject to
double jeopardy under the Fifth Amendment of the U.S.
Constitution.

     Held: P is liable for the addition to tax for
fraud for 1985, 1986, and 1987.

     Held, further, imposition of the addition to tax
for fraud against P for 1985, 1986, and 1987, after he
was convicted of income tax evasion for 1986 and
                                - 2 -


     willful failure to file a return for 1987, does not
     subject him to double jeopardy in violation of the
     Fifth Amendment.


     Tristan P. Junius, for petitioner.

     Loren B. Mark, for respondent.



               MEMORANDUM FINDINGS OF FACT AND OPINION

     COLVIN, Judge:    In the notice of deficiency, respondent

determined that petitioner is liable for additions to tax as

follows:

                            Additions to Tax
              Sec.       Sec.        Sec.         Sec.       Sec.
   Year    6653(b)(1) 6653(b)(2) 6653(b)(1)(A) 6653(b)(1)(B) 6654
                          1
   1985      $6,677                   --          --        $706
                                                   2
   1986        --         --         $13,206                  851
                                                   3
   1987        --         --           3,952                  106
     1
       Fifty   percent of the interest due on the $13,354
underpayment   due to fraud.
     2
       Fifty   percent of the interest due on the $17,608
underpayment   due to fraud.
     3
       Fifty   percent of the interest due on the $5,269
underpayment   due to fraud.

     After concessions,1 the issues for decision are:

     1.    Whether petitioner is liable for additions to tax for

fraud under section 6653(b) for 1985, 1986, and 1987.       We hold

that he is.




     1
       Petitioner concedes that he is liable for the addition to
tax for failure to pay estimated tax under sec. 6654 for 1985,
1986, and 1987.
                                 - 3 -


     2.      Whether the imposition of additions to tax for fraud

against petitioner under section 6653(b) for 1985, 1986, and

1987, after petitioner’s conviction for income tax evasion under

section 7201 for 1986 and willful failure to file under section

7203 for 1987, violates the Double Jeopardy Clause of the Fifth

Amendment.     We hold that it does not.

     Section references are to the Internal Revenue Code as in

effect for the years in issue.     Rule references are to the Tax

Court Rules of Practice and Procedure.

                           FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.

A.   Petitioner

     Petitioner lived in Minooka, Illinois, when he filed the

petition in this case.

     Petitioner was born on January 22, 1955.      He graduated from

high school in 1973.     He has been married to Barbara Price since

1973.     They have three children:   Lee, Eric, and Ana.   Lee and

Eric were dependents of petitioner and his wife during the years

in issue.     Ana was born after the years in issue.

     From 1973 to 1977, petitioner was an apprentice electrician

with the International Brotherhood of Electrical Workers,

studying and working to become a journeyman electrician.       In

1977, petitioner became a journeyman electrician.      From 1977

until the time of trial, he worked as a journeyman electrician
                                 - 4 -


for several employers.   A journeyman electrician must have

substantial knowledge about being an electrician.       Each State

in which petitioner worked required him to pass a license

examination.

     From 1985 to 1987, petitioner received wages as follows:

          Employer                    1985           1986        1987

   L.K. Comstock & Co., Inc.      $44,331.79     $56,659.08   $1,660.00
   Hatfield Electric Co.              666.00        --           --
   Meany Elec. Engg. Co., Inc.      3,275.61        --           --
   Hyre Elec. Co. of Ind.              --           --         3,522.25
   Harding Elec., Inc.                 --           --         6,120.18
   NECA - IBEW Local 176               --           --           450.00
   Industrial Instruments Inc.         --           --         1,416.10
   W.J. O'Brien Elec. Co.,             --           --         3,899.07
     Inc.
   Philip J. Burkhart                  --           --           480.00
   Electric Sys. & Serv., Inc.         --           --         7,036.41
   J.F. Edwards Constr. Co.            --           --           320.00
   J. Thomas Elec., Inc.               --           --           740.00
   Hoffman Elec. Co.                   --           --         1,670.46
   Commonwealth Elec. Co.              --           --         5,609.46
      Totals                       48,273.40      56,659.08   32,923.93

     Petitioner received a Form W-2 from each of these employers

for the wages paid to him.

     From 1985 to 1987, petitioner also had the following taxable

income:

          Year       Interest            Unemployment Compensation
          1985        $91.62                        --
          1986        102.21                        --
          1987        144.42                      $1,314

     Petitioner filed timely Federal income tax returns for tax

years 1973 to 1979, most of which were prepared by H & R Block.

He filed a timely tax return for 1980, prepared by R.W. Breisch.
                               - 5 -


B.   Petitioner’s Tax Protester Activities

     Beginning around 1979, petitioner learned that some of his

coworkers were not filing tax returns and were submitting Forms

W-4 to their employer on which they claimed to be exempt from

Federal tax withholding.   Some of his coworkers gave him tax

protester literature that said wages were not taxable income

and that payment of Federal income taxes was voluntary.

     Petitioner did not file timely Federal income tax returns

for tax years 1981 to 1988.   He did not ask an attorney,

accountant, or return preparer whether he was required to file a

tax return.   From 1985 to 1987, petitioner had contacts with

members of a tax protester group known as the "Golden Means".

     By 1983, respondent began sending letters to petitioner

asking about his failure to file tax returns.   Petitioner usually

sent respondent the following written response:

          Your letter stated that you have not received a
     form 1040 Income Tax Return for * * * [taxable period
     specified], then you procede [proceed] to request a tax
     return.

          I would be happy to comply with your request if
     you will please answer the following questions;

          1. Can you show me how to fill out a return
     without waiving any of my Constitutional rights?

          2. Will you grant me immunity in non-tax related
     matters?

          3. Is a return voluntary or compelled?

          The answers to these questions are very important
     to me, as a citizen of this country. If you cannot
                               - 6 -


     answer these questions for me, would you please direct
     me to someone within the Internal Revenue Service who
     can? I anxiously await your reply.

     Before the tax years in issue, respondent assessed penalties

against petitioner for filing false Forms W-4 for his 1982 tax

year.   From 1984 to 1987, petitioner submitted false Forms W-4

to his employers on which he claimed what he now concedes were

excessive numbers of withholding allowances.     These Forms W-4

were as follows:

         Date              Employer                Allowances Claimed
         1984
        12/5/84      Meany Elec. Engg. Co.,               99
                       Inc.
         1985
        1/28/85      L.K. Comstock & Co., Inc.            14
        3/25/85      L.K. Comstock & Co., Inc.            99
        6/26/85      Hatfield Electric Co.                99
        7/8/85       L.K. Comstock & Co., Inc.            99

          1987
        5/12/87     Hatfield Electric Co.                 10
        10/1/87     J.F. Edwards Constr. Co.              10
        10/16/87    J. Thomas Electric, Inc.              10
        10/26/87    Philip J. Burkhart                    10
        12/21/87    Industrial Instruments,                9
                      Inc.

        Undated      Electric Sys. & Serv., Inc.          10

     By claiming a large number of withholding allowances,

petitioner eliminated withholding of a substantial amount of

taxes from his wages for 1985 and 1987, and eliminated all

withholding from his wages for 1986.   Petitioner concedes that he

was entitled to claim only four withholding allowances for 1985,

1986, and 1987.
                                 - 7 -


     After learning that respondent was investigating him for

possible criminal tax violations, petitioner, in March 1990,

retained Tristan P. Junius (Junius) to prepare his tax returns

for tax years 1981 to 1988.     Petitioner gave Junius his records,

including Forms W-2, Forms 1099, and pay stubs.

C.   Petitioner’s Tax Returns for 1985, 1986, and 1987

     In August 1990, petitioner filed delinquent tax returns for

1985, 1986, and 1987.     Petitioner reported the following income

and tax liabilities:

                                 1985       1986       1987
     Gross Income              $48,365    $56,761    $34,382

     Less:
             Standard deduc.      --         --       (1,888)
             Exemptions (4)     (4,160)    (4,320)    (7,600)
                                           1          2
     Taxable income             44,205      54,236     24,902

     Tax                        13,354     17,608      5,269

     Less:
           Tax withheld          (823)         --     (2,637)

     Tax due per return         12,531     17,608      2,632
     1
       To calculate taxable income for 1986, petitioner
subtracted $4,320 from $58,556. There is no evidence about how
petitioner calculated $58,556.
     2
       To calculate taxable income for 1987, petitioner
subtracted $1,880 from $34,382 which equaled $32,502. He then
subtracted $7,600 from $32,502 which equaled $24,902.

D.   Petitioner’s Conviction for Tax Evasion and Willful Failure
     To File a Return

     On April 1, 1992, petitioner was indicted for income tax

evasion under section 7201 for 1985 and 1986, and for willful
                               - 8 -


failure to file a return under section 7203 for 1985, 1986, and

1987.   On June 10, 1992, petitioner pleaded guilty to income tax

evasion under section 7201 for 1986 and to willful failure to

file a return under section 7203 for 1987.   In his plea

agreement, petitioner admitted that he attempted to evade Federal

income taxes by filing false Forms W-4 for 1985, 1986, and 1987.

His plea agreement stated in part as follows:

          5.   Defendant will plead guilty because he is in
     fact guilty of the charges contained in Counts Three
     and Five of the indictment. In pleading guilty to
     these counts, defendant acknowledges that:

               (a) as charged in Count Three of the
     indictment, during calendar year 1986, defendant had
     gross income of $56,761 and taxable income of $52,441.
     Upon that income, defendant owed at least $11,691 in
     income taxes to the United States. Defendant knew that
     he was required by law on or before April 15, 1987 to
     make an income tax return to the Internal Revenue
     Service and to pay his income tax. Defendant wilfully
     failed to file an income tax return and failed to pay
     his income taxes on or before April 15, 1987.
     Defendant further acknowledges that he did not file his
     1986 tax return until August 1990. In addition,
     defendant attempted to evade the payment of income
     taxes for the calendar year 1986 by submitting a false
     Employee's Withholding Allowance Certificate (Form W-4)
     in which he falsely claimed that he was entitled to
     ninety-nine withholding allowances, in order to prevent
     his employer from withholding the proper amount of
     income tax from his pay.

               (b) as charged in Count Five of the
     indictment, defendant had gross income of approximately
     $34,382 in the calendar year 1987, which included
     payments he received for his services as an
     electrician. Defendant knew that he was required to
     make an income tax return to the Internal Revenue
     Service on or before April 15, 1988, and wilfully
     failed to make the required income tax return to the
     Internal Revenue Service or to any other proper officer
                               - 9 -


     of the United States on or before April 15, 1988.
     Defendant further acknowledges that he did not file his
     1987 tax return until August 1990. On April 15, 1988,
     defendant owed income tax to the United States of at
     least $687, in addition to the amount of tax that was
     withheld from his pay and paid on his behalf by his
     employer. In addition, defendant attempted to evade
     the payment of income tax for the calendar year 1987 by
     submitting six false Employee's Withholding Allowance
     Certificates (Form W-4) to his employer, in which he
     falsely claimed that he was entitled to ten withholding
     allowances, in order to prevent his employers from
     withholding the proper amount of income tax from his
     pay.

          6.   Pursuant to [section] 1B1.3 of the United
     States Sentencing Guidelines, the defendant and his
     attorney and the government further agree and stipulate
     that during calendar year 1985, defendant had gross
     income of $48,365 and taxable income of $44,205. Upon
     that income, defendant owed to the United States at
     least $7,999 in income tax in addition to the amount of
     tax withheld and paid on his behalf by his employer.
     Defendant knew that he was required by law on or before
     April 15, 1986 to make an income tax return to the
     Internal Revenue Service and to pay his income tax.
     Defendant wilfully failed to file an income tax return
     and failed to pay his income tax on or before April 15,
     1986. Defendant further acknowledges that he did not
     file his 1985 tax return until August 1990. In
     addition, defendant attempted to evade the payment of
     income tax for the calendar year 1985 by submitting
     four false Employee's Withholding Allowance
     Certificates (Form W-4) in which he falsely claimed
     that he was entitled to ninety-nine withholding
     allowances, in order to prevent his employers from
     withholding the proper amount of income tax from his
     pay.

     On September 30, 1992, the court accepted petitioner's

guilty pleas.   Petitioner was convicted of tax evasion in

violation of section 7201 for 1986 and for willful failure to

file a return in violation of section 7203 for 1987.   He was

sentenced to 3 years' probation.
                                - 10 -


                                OPINION

A.   Addition to Tax for Fraud Under Section 6653(b)

     1.    Contentions of the Parties and Background

     Petitioner contends that he is not liable for the addition

to tax for fraud for the years in issue because he was misled by

some of his friends who were not filing tax returns and who were

claiming to be exempt from withholding; that he sincerely

believed that he did not have to pay tax; and that respondent did

not advise him that his conduct was illegal in response to his

letters.   Respondent contends that petitioner intended to evade

taxes for each year in issue.

     A taxpayer who commits fraud is liable for an addition to

tax of 50 percent of the underpayment for 1985, and 75 percent

of the underpayment due to fraud for 1986 and 1987.    Sec.

6653(b)(1); sec. 6653(b)(1)(A).    Respondent has the burden of

proving fraud by clear and convincing evidence.    Sec. 7454(a);

Rule 142(b).    First, respondent must prove the existence of an

underpayment.    Sec. 6653(b)(1); King's Court Mobile Home Park,

Inc. v. Commissioner, 98 T.C. 511, 515-516 (1992); Parks v.

Commissioner, 94 T.C. 654, 660 (1990).    Second, respondent must

show that petitioner intended to evade taxes he believed to be

owing by conduct intended to conceal, mislead, or otherwise

prevent tax collection for each year in issue.    Stoltzfus v.

United States, 398 F.2d 1002, 1004 (3d Cir. 1968); Parks v.
                              - 11 -


Commissioner, supra at 661; Rowlee v. Commissioner, 80 T.C. 1111,

1123 (1983).

     2.   Underpayment

     Petitioner concedes that he understated his tax for each of

the years in issue.

     3.   Fraudulent Intent

     Respondent must prove by clear and convincing evidence

that petitioner had fraudulent intent.     Parks v. Commissioner,

supra at 664.   For purposes of section 6653(b), fraud means

actual, intentional wrongdoing, Mitchell v. Commissioner, 118

F.2d 308, 310 (5th Cir. 1941), revg. 40 B.T.A. 424 (1939), or

the intentional commission of an act for the specific purpose

of evading a tax believed to be owing, Webb v. Commissioner,

394 F.2d 366, 377 (5th Cir. 1968), affg. T.C. Memo. 1966-81.

          a.    Direct Evidence of Fraud

     There is direct evidence of petitioner’s fraud because

petitioner admitted in his plea agreement that he tried to evade

tax that he knew he owed for 1985, 1986, and 1987.    Direct

evidence can be sufficient to support a finding of fraudulent

intent.   Catalfo v. Commissioner, T.C. Memo. 1995-106 (taxpayer’s

admissions connected with plea agreement established fraudulent

intent); Larson v. Commissioner, T.C. Memo. 1994-302, affd.

without published opinion 60 F.3d 830 (8th Cir. 1995) (plea

agreement was evidence of fraudulent intent).
                                - 12 -


            b.   Circumstantial Evidence of Fraud

     Fraud may also be proven by circumstantial evidence.

Stephenson v. Commissioner, 79 T.C. 995, 1005-1006 (1982), affd.

748 F.2d 331 (6th Cir. 1984).    The courts have developed a number

of objective indicators or "badges" of fraud.       Recklitis v.

Commissioner, 91 T.C. 874, 910 (1988).    The badges of fraud in

this case corroborate petitioner's admitted intent to evade tax

for 1985, 1986, and 1987.   The badges of fraud present here are:

(a) Filing false Forms W-4; (b) failure to file income tax

returns; (c) substantially understating income for several years;

and (d) making implausible or inconsistent explanations of

behavior.    Bradford v. Commissioner, 796 F.2d 303, 307-308 (9th

Cir. 1986), affg. T.C. Memo. 1984-601; Ruark v. Commissioner,

449 F.2d 311, 312-313 (9th Cir. 1971), affg. T.C. Memo. 1969-48;

Meier v. Commissioner, 91 T.C. 273, 297-298 (1988).

            c.   Filing False Forms W-4

     Filing false Forms W-4 may be evidence of fraud.       Bradford

v. Commissioner, supra at 308; Recklitis v. Commissioner, supra

at 910-911; Rowlee v. Commissioner, supra at 1125; Stephenson v.

Commissioner, supra at 1007.

     Respondent penalized petitioner for filing false Forms W-4

for his 1982 tax year.   Despite this, petitioner later filed

false Forms W-4:   (a) In 1984, claiming 99 withholding

allowances; (b) in 1985, claiming 14 withholding allowances, and
                              - 13 -


2 months later, claiming 99 withholding allowances; (c) in 1985,

claiming 99 withholding allowances; and (d) in 1987, claiming 10

withholding allowances and later 9 withholding allowances.

     Petitioner concedes that the correct number of withholding

allowances for him during the years in issue was four.     By

claiming an excessive number of withholding allowances,

petitioner eliminated a substantial amount of withholding for

1985 and 1987, and all withholding for 1986.   Petitioner knew

or should have known that he was required to submit correct

Forms W-4 for the years in issue because, before the years in

issue, respondent assessed penalties against him for filing false

Forms W-4 for 1982.

     Petitioner also submitted false Forms IL-W-4 for 1985, 1986,

and 1987, pertaining to withholding allowances for Illinois

income tax.

     Petitioner contends that he honestly believed that he did

not have to pay tax, that the tax law was invalid as to wages,

and that paying income tax was voluntary.   We disagree.

Petitioner did not try to contact a tax professional during the

years in issue.   We do not believe that petitioner honestly

believed that he was not liable for tax for the years in issue.

     Petitioner’s contention that he honestly believed that he

was not required to file returns and pay tax is inconsistent with

his plea agreement.   In the plea agreement, he admitted that he
                                - 14 -


knew that he had to file tax returns and pay taxes for 1985,

1986, and 1987; that he willfully failed to do so; and that he

intended to evade taxes by filing false withholding certificates.

     Petitioner’s testimony that he believed that he did not have

to pay income tax during the years in issue is not credible

because he used a return preparer and filed returns before the

years in issue.     Hebrank v. Commissioner, 81 T.C. 640, 642 (1983)

(taxpayer’s compliance in earlier years indicates knowledge of

the requirement to comply in later years).

     Petitioner's situation is similar to that of the taxpayer in

Rowlee v. Commissioner, supra.     The taxpayer in Rowlee was a high

school graduate and a wage earner who filed returns before the

years in issue, but not for the years in issue.    His employers

did not withhold tax because he submitted Forms W-4 on which he

claimed either that he was exempt or that he was entitled to 10

withholding allowances.

     We conclude that petitioner’s filing of false Forms W-4 is a

badge of fraud.

          d.      Failure To File Income Tax Returns

     Failure to file income tax returns may be evidence of fraud,

particularly if the taxpayer submits false Forms W-4.2    Hebrank

     2
       Failure to file tax returns and use of false Forms W-4
have been held to be sufficient to establish criminal tax
evasion. See United States v. Parkinson, 602 F. Supp. 121, 123
(N.D. Ill. 1984), affd. without published opinion 774 F.2d 1168
                                                   (continued...)
                               - 15 -


v. Commissioner, supra (exempt); Rowlee v. Commissioner, supra at

1123-1125 (exempt or 10 withholding allowances); Habersham-Bey v.

Commissioner, 78 T.C. 304 (1982) (13 withholding allowances).

Petitioner did not file income tax returns for the years in

issue.

     Petitioner contends that he did not file returns because he

sincerely believed that he was not required to do so based on his

study of tax law.   Petitioner’s claim is implausible.   Petitioner

filed income tax returns from 1973 to 1981.    He knew during those

years that he was supposed to file returns.    He said that he

stopped filing returns because he thought that wages were not

income and that payment of tax was voluntary.    He did not consult

with a tax professional.   Petitioner understood his duty to file

returns before 1981.

     In his plea agreement petitioner admitted that he knew that

he was required by law to file a timely income tax return and pay

tax for each of the years in issue.     We find that he was aware of

the requirements of the Internal Revenue Code in that respect.

Insofar as he believed them to be invalid or unconstitutional,

his belief does not shield him from the additions to tax for

fraud.    See Niedringhaus v. Commissioner, 99 T.C. 202, 216-220

(1992).


     2
      (...continued)
(7th Cir. 1985).
                               - 16 -


            e.   Substantially Understating Income

       A pattern of substantially underreporting income tax

liability for several years may be evidence of fraud.    Holland v.

United States, 348 U.S. 121, 137-139 (1954); Estate of Mazzoni v.

Commissioner, 451 F.2d 197, 202 (3d Cir. 1971), affg. T.C. Memo.

1970-144; Rogers v. Commissioner, 111 F.2d 987, 989 (6th Cir.

1940), affg. 38 B.T.A. 16 (1938).    Petitioner substantially

underreported income of $48,365 for 1985, $56,761 for 1986, and

$34,382 for 1987.

            f.   Implausible or Inconsistent Explanations of
                 Behavior

       Implausible or inconsistent explanations of behavior may

be a badge of fraud.    Bradford v. Commissioner, 796 F.2d at 307-

308.    Petitioner’s contention that he did not know that he had

to file tax returns and pay income tax for the years in issue

is implausible and inconsistent with his plea agreement.

       4.   Open Defiance as a Defense to Fraud

       Petitioner contends that the fact that he sent several

letters to respondent shows that he is not liable for fraud.      We

disagree.

       Petitioner relies on Raley v. Commissioner, 676 F.2d 980,

984 (3d Cir. 1982), revg. T.C. Memo. 1980-571.    In Raley, the

U.S. Court of Appeals for the Third Circuit held that filing

false Forms W-4 and an invalid tax return did not establish

fraud where the taxpayer clearly informed various people in the
                              - 17 -


collection process that he was not paying and would not pay

income taxes.   The U.S. Court of Appeals for the Third Circuit

said that it would be anomalous to suggest that Raley’s attempts

to notify the Government supported an intent to defraud.

     In Zell v. Commissioner, 763 F.2d 1139, 1144 (10th Cir.

1985), affg. T.C. Memo. 1984-152, the U.S. Court of Appeals for

the Tenth Circuit adopted the rationale in Raley.      However, that

court held that the taxpayer was liable for the addition to tax

for fraud because he filed false Forms W-4, which was an

affirmative act of concealment or misrepresentation, and he

failed to file tax returns or disclose to the Commissioner that

he was not filing tax returns.   Id. at 1145-1146.

     The taxpayer in Granado v. Commissioner, 792 F.2d 91 (7th

Cir. 1986), affg. T.C. Memo. 1985-237, was a high school graduate

and electrician who said he believed that wages were not income.

He argued that he was not liable for additions to tax for fraud

“because he notified the Commissioner through various

communications that he was filing the false forms in the belief

that he was exempt from taxation.”     Id. at 92.   The U.S. Court of

Appeals for the Seventh Circuit, the Circuit in which this case

is appealable, disagreed with Zell and Raley, and held that the

taxpayer could not avoid liability for the addition to tax for

fraud by disclosing his evasion of taxes to the IRS.     The Court

of Appeals for the Seventh Circuit said:
                              - 18 -


     fraud under section 6653 “is intentional wrongdoing on
     the part of the taxpayer to avoid a tax known to be
     owing.” Akland v. Commissioner, 767 F.2d 618, 621 (9th
     Cir. 1985). By filing fraudulent W-4 forms and failing
     to file tax returns, appellant succeeded in avoiding
     paying taxes for a number of years. The fact that he
     told the Internal Revenue Service that he was evading
     taxes does not make it any less fraudulent. * * *

Granado v. Commissioner, supra at 93.    We follow Granado v.

Commissioner, supra.   Golsen v. Commissioner, 445 F.2d 985 (10th

Cir. 1971), affg. 54 T.C. 742 (1970).    We conclude that the fact

that petitioner sent letters to respondent raising frivolous

constitutional and other legal questions about filing tax returns

does not preclude a finding of fraud.    Cloutier v. Commissioner,

T.C. Memo. 1994-558.

     Petitioner contends that respondent entrapped him by not

responding to his letters.   We disagree.   We do not believe that

petitioner wrote those letters in good faith.    Respondent put

petitioner on notice that he was wrong before the years in issue

when respondent assessed penalties against petitioner for filing

false Forms W-4 in 1982.

     5.   Other Cases on Which Petitioner Relies

     Petitioner contends that he is like the taxpayer in

Marinzulich v. Commissioner, 31 T.C. 487 (1958), whose lack of

education negated fraudulent intent.    We disagree.   The taxpayer

in Marinzulich had a third grade education, lacked familiarity

with income tax laws, used a tax return preparer, filed returns

for the years in issue, and did not falsify any records.
                                - 19 -


Petitioner was a high school graduate and an electrician.      He

knew of his obligation to file and pay tax.   He filed tax returns

before 1981, but did not file returns, pay the tax he owed, or

rely on tax professionals for the years in issue until after he

learned that he was under investigation for possible criminal tax

violations.

     Petitioner also cites Danenberg v. Commissioner, 73 T.C. 370

(1979).    In Danenberg, the taxpayers were farmers and were

heavily indebted to a bank.   They sold six lots to third parties.

The bank canceled their debt.    The Commissioner determined that

the taxpayers were liable for the addition to tax for fraud

because they did not report any gain on the sale of the six lots.

We held that the taxpayers were not liable for fraud because a

person who is not an expert in tax law may not have understood

the tax consequences of the transfer of the six lots.    Id. at

393-394.   That case is distinguishable from the present case

because petitioner’s income tax return did not involve complex

facts or issues; most of petitioner's income was from wages.

     6.    Conclusion

     We conclude that respondent has shown both by clear and

convincing direct evidence, and clear and convincing

circumstantial evidence, that petitioner is liable for the

addition to tax for fraud for 1985, 1986, and 1987.
                              - 20 -


     7.   Underpayment Due to Fraud

     If the Commissioner establishes that any of the underpayment

is due to fraud, the taxpayer must show how much of the

underpayment is not due to fraud.    Sec. 6653(b)(2); see Tax

Reform Act of 1986, Pub. L. 99-514, secs. 1503(a), (e), 100 Stat.

2085, 2742-2743.   Petitioner has not shown that any of the

underpayment is not due to fraud.    We hold that the each of the

underpayments for 1985, 1986, and 1987 is due to fraud.

B.   Double Jeopardy

     1.   Petitioner’s Contentions

     Petitioner contends that imposition of the addition to tax

for fraud against him for 1985, 1986, and 1987 violates the

Double Jeopardy Clause of the Fifth Amendment to the U.S.

Constitution (Double Jeopardy Clause) because he contends that he

was criminally prosecuted for the same conduct.

     2.   Double Jeopardy Analysis

     The Double Jeopardy Clause forbids "any person * * * subject

for the same offense to be twice put in jeopardy of life or

limb".3

     3
       The Fifth Amendment to the Constitution provides as
follows:

          No person shall be held to answer for a capital,
     or otherwise infamous crime, unless on a presentment or
     indictment of a Grand Jury, except in cases arising in
     the land or naval forces, or in the Militia, when in
     actual service in time of War or public danger; nor
                                                   (continued...)
                             - 21 -


     The Double Jeopardy Clause bars imposition of civil damages

equivalent to criminal punishment for conduct which has already

been the subject of a criminal prosecution.   United States v.

Halper, 490 U.S. 435, 448-449 (1989); Blockburger v. United

States, 284 U.S. 299, 304 (1932).   Conduct is different for

double jeopardy purposes if the criminal and civil proceedings

require proof of different facts.   Blockburger v. United States,

supra.

          a.   1985

     Petitioner was not convicted or acquitted of, and did not

plead guilty to, any tax crime for 1985.   Therefore, imposition

of the addition to tax for fraud under section 6653(b)(1) and (2)

does not subject him to double jeopardy for 1985.     Blockburger v.

United States, supra; see Catalfo v. Commissioner, T.C. Memo.

1995-106 (taxpayer was not convicted of and did not plead guilty

to tax crimes for the years in issue); thus, Tax Court

proceedings did not subject him to double jeopardy.

     We conclude that the imposition of the addition to tax for

fraud under section 6653(b)(1) and (2) does not violate

petitioner’s right not to be subject to double jeopardy for 1985.

     3
      (...continued)
     shall any person be subject for the same offense to be
     twice put in jeopardy of life or limb; nor shall be
     compelled in any criminal case to be a witness against
     himself, nor be deprived of life, liberty, or property,
     without due process of law; nor shall private property
     be taken for public use, without just compensation.
                                - 22 -


           b.    1986

     Petitioner was convicted of income tax evasion under section

7201 for 1986.    Criminal tax evasion under section 7201 and civil

fraud under section 6653(b) require proof of the same facts.

Amos v. Commissioner, 43 T.C. 50, 55 (1964), affd. 360 F.2d 358

(4th Cir. 1965).    Thus, sections 7201 and 6653(b) apply to the

same conduct for purposes of double jeopardy.

     We must next decide whether imposition of the addition to

tax under section 6653(b)(1)(A) and (B) is punishment for

purposes of the Double Jeopardy Clause.    A civil sanction is

punishment for double jeopardy purposes if it is not remedial

but is imposed to serve the punitive goals of deterrence and

retribution.     Department of Revenue v. Kurth Ranch,    U.S.     ,

114 S. Ct. 1937, 1944 (1994); United States v. Halper, supra at

448-449.   The 50-percent addition to tax for civil tax fraud as

under section 6653(b)(1) and (2) in effect before 1986 was not a

criminal punishment for purposes of the Double Jeopardy Clause

because it was imposed primarily to protect the revenue and to

reimburse the Government for the heavy expense of investigation

and the loss resulting from the taxpayer's fraud.     Helvering v.

Mitchell, 303 U.S. 391, 398, 401 (1938); Ianniello v.

Commissioner, 98 T.C. 165, 176-185 (1992).

     Congress amended section 6653(b) effective for returns due

after December 31, 1986, to apply the addition to tax under
                                   - 23 -


section 6653(b)(1)(A) to the portion of the underpayment due to

fraud rather than the entire underpayment (as under former

section 6653(b)(1)) and raise the rate from 50 to 75 percent.

Tax Reform Act of 1986, Pub. L. 99-514, secs. 1503(a), (c), 100

Stat. 2085, 2742-2743; H. Rept. 99-426, 1986-3 C.B. (Vol. 2) 1,

834-835.   We must decide whether section 6653(b) as amended in

1986 continues to be remedial, or whether it serves punitive

goals of deterrence or retribution.             Department of Revenue v.

Kurth Ranch, supra; United States v. Halper, supra.

     We believe that Congress intended section 6653(b) to

continue to be remedial.     The report of the Ways and Means

Committee for the Tax Reform Act of 1986 explained the changes to

the fraud addition to tax in 1986 as follows:

                         Reasons for Change

                     *   *     *     *      *     *   *

          The committee is also concerned that the current
     applicability of the fraud penalty to the entire
     underpayment of tax (once the IRS has established fraud
     with respect to any portion of the underpayment) may
     decrease the efficacy of this penalty. The committee
     is concerned that imposing the same penalty on two
     taxpayers who have identical underpayments, one
     attributable wholly to fraud and the other attributable
     only in part to fraud, may be an insufficient deterrent
     to fraudulent behavior. Consequently, the committee
     has narrowed the scope of the fraud penalty so that it
     applies only to the portion of the underpayment
     attributable to fraud. The committee has concomitantly
     increased the level of the penalty. The committee
     believes that these modifications more appropriately
     target the fraud penalty to fraudulent behavior.

H. Rept. 99-426, 1986-3 C.B. (Vol. 2) 1, 834.
                                  - 24 -


     The Government is entitled to rough remedial justice

according to somewhat imprecise formulas.       United States v.

Halper, supra at 446.     We view section 6653(b) to be the same

after the 1986 amendment as before, for purposes of applying the

Double Jeopardy Clause.

     Section 6653(b)(1)(A) and (B) is quite different from the

Montana drug tax, the imposition of which the Supreme Court held

violated the Double Jeopardy Clause.       Department of Revenue v.

Kurth Ranch, supra at 1948.       The Montana drug tax in Kurth Ranch

was punitive, unlike the additions to tax at issue here.        In

Kurth Ranch, Montana assessed almost $900,000 in taxes

and penalties on illegally possessed marijuana and hash oil which

had been confiscated from six individuals who pleaded guilty to

possession or storage of dangerous drugs.       Id. at 1942, 1946-

1947.   The tax equaled about 800 percent of the market value of

the confiscated drugs.    The tax applied only in cases in which

the State had imposed a criminal penalty for possession of

illegal drugs.     Id. at 1947.   The Montana drug tax is the

equivalent of criminal punishment for purposes of the Double

Jeopardy Clause.     Id. at 1947.

     We conclude that the imposition of the addition to tax for

fraud under section 6653(b)(1)(A) and (B) does not violate

petitioner’s right not to be subject to double jeopardy for 1986.
                             - 25 -


          c.   1987

     Petitioner was convicted under section 7203 for failure to

file an income tax return for 1987.    The elements of criminal

failure to file under section 7203 are not the same as the

elements of civil tax fraud under section 6653(b)(1)(A) and (B).

Blockburger v. United States, 284 U.S. at 304.    Thus, we conclude

that the imposition of the addition to tax for fraud under

section 6653(b)(1)(A) and (B) does not violate petitioner’s right

not to be subject to double jeopardy for 1987.

     3.   Conclusion

     We hold that the imposition of the addition to tax for

fraud under section 6653(b)(1) and (2) for 1985 and section

6653(b)(1)(A) and (B) for 1986 and 1987 does not violate

petitioner’s right not to be subject to double jeopardy under the

Fifth Amendment to the Constitution.


                                           Decision will be entered

                                      for respondent.
