James Luther Cochrane - Page 3

                                        - 3 -                                         
               The issues for decision are:  (1) Whether petitioner                   
          received taxable income as determined by respondent for each of             
          the years in issue; (2) whether petitioner is liable for an                 
          addition to tax for fraud under section 6653(b)1 for each of the            
          years in issue; (3) whether petitioner is liable for an addition            
          to tax for substantial understatement of income tax under section           
          6661 for 1984; and (4) whether petitioner is liable for an                  
          addition to tax for failure to pay estimated tax under section              
          6654 for 1986.                                                              
               Prior to trial, the Court granted respondent's motion to               
          impose sanctions pursuant to Rule 104(c), as a result of                    
          petitioner's failure to obey our order that he respond to                   
          requests for admission.  We ordered that the matter contained in            
          respondent's requests be taken as established for purposes of               
          this case.  Because of the importance of this ruling to the                 
          outcome of this case, we will explain the relevant procedural               
          history as well as the reasoning behind our imposition of                   
          sanctions.                                                                  

                                Procedural Background                                 

               From the inception of this case, petitioner demonstrated               
          that he intended to rely upon frivolous positions.  For example,            

               1Unless otherwise indicated, all section references are to             
          the Internal Revenue Code in effect for the taxable years in                
          issue, and all Rule references are to the Tax Court Rules of                
          Practice and Procedure.                                                     




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