A Different Fraud Standard? Section 6663 and Syndicated Easements

Publication: Tax Notes Federal, March 2, 2026

The civil fraud penalty under section 6663 adds 75 percent of the underpayment and lifts the statute of limitations, so the IRS must prove fraud by clear and convincing evidence.

William Stone examines a pattern in which the IRS asserts fraud without the traditional badges of fraud, sometimes years into litigation or even after trial. He reviews the IRS's recurring theories, including pattern-of-deals, overvaluation, and backdated documents, and explains why the Tax Court has rejected them, most recently in North Donald.

The article also covers post-Jarkesy challenges to civil penalties and why full disclosure on a return weighs heavily against a fraud finding.

Related services: IRS Penalty Defense · U.S. Tax Court Litigation

Read the article