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petitioner Dennis J. Deneault realized from sales of illegal
drugs in 1991. Further, petitioners are deemed to have admitted
that they fraudulently and with the intent to evade taxes
understated their taxable income for 1991 in the amount of
$182,752, and that the underpayment of tax required to be shown
on their income tax return for 1991 is due to fraud.
We hold that the facts deemed admitted pursuant to Rule
37(c) satisfy respondent's burden of proving fraud. Doncaster v.
Commissioner, supra at 337.5 Those facts constitute clear and
convincing evidence that petitioners failed to report the income
derived from sales of illegal drugs during 1991 fraudulently and
with the intent to evade taxes known to be owing and that the
entire underpayment of taxes required to be shown on petitioners'
1991 income tax return is due to fraud. Consequently, respondent
is entitled to judgment on the pleadings that petitioners are
liable for the penalty for fraud under section 6663(a) for the
taxable year 1991.
To reflect the foregoing,
5 See also Marshall v. Commissioner, 85 T.C. 267 (1985);
Davis v. Commissioner, T.C. Memo. 1993-324; Cruise v.
Commissioner, T.C. Memo. 1992-688; Asher v. Commissioner, T.C.
Memo. 1992-377; Eisenstein v. Commissioner, T.C. Memo. 1987-241;
Dimsdale v. Commissioner, T.C. Memo. 1987-53; Ricotta v.
Commissioner, T.C. Memo. 1986-508; Twist v. Commissioner, T.C.
Memo. 1986-497; Siravo v. Commissioner, T.C. Memo. 1986-482;
Jackson v. Commissioner, T.C. Memo. 1986-15.
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