Carolyn M. Lee - Page 7

           Commissioner, 86 T.C. 110, 112 (1986); Brooks v. Commissioner, 82                          
           T.C. 413, 424-425 (1984), affd. without published opinion 772                              
           F.2d 910 (9th Cir. 1985); Freedson v. Commissioner, 67 T.C. 931,                           
           935-936, 938 (1977), affd. 565 F.2d 954 (5th Cir. 1978).                                   
                  Petitioner did not appear at the trial session in Winston-                          
           Salem, North Carolina, and failed to submit a trial memorandum,                            
           as required by the Court’s Standing Pre-Trial Order, or request a                          
           continuance.  Petitioner has abandoned her case.  Respondent's                             
           motion for entry of default judgment as to the deficiencies and                            
           addition to tax is granted.  Rule 123(a).                                                  
                  Respondent has also moved to default petitioner for the                             
           addition to tax and penalty for fraud.  Petitioner has failed to                           
           proceed with her case within the meaning of Rule 123(a).  Under                            
           these circumstances, a default decision for fraud is appropriate                           
           if, in the answer, respondent alleged facts which, if proven,                              
           clearly and convincingly support such a judgment.  Smith v.                                
           Commissioner, 91 T.C. 1049, 1058 (1988), affd. 926 F.2d 1470 (6th                          
           Cir. 1991).  The granting of the Rule 37(c) motion has the effect                          
           of establishing facts pleaded in the answer.                                               
                  The facts respondent alleged in the answer, deemed admitted,                        
           constitute clear and convincing evidence that petitioner                                   
           fraudulently underpaid her taxes for the years in issue.  Because                          
           petitioner did not respond to respondent's Rule 37(c) motion, she                          
           is deemed to have admitted that:  (1) She misappropriated for her                          

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