-44-
proceeding. See Armstrong v. United States, 173 Ct. Cl. 944, 354
F.2d 274, 291 (1965); Ochs v. Commissioner, T.C. Memo. 1986-595.
We conclude that petitioners are collaterally estopped from
denying that they are liable for the addition to tax for fraud
for 1987.
6. Conclusion
We conclude that respondent proved by clear and convincing
evidence that both petitioners are liable for additions to tax
for fraud for each of the years in issue.
D. Statute of Limitations
Petitioners allege that the statute of limitations bars
assessment and collection of tax for the years at issue.
Respondent argues that the 3-year limit on the time to assess tax
under section 6501(a) does not apply here because petitioners'
underpayments were due to fraud. We have found that petitioners
committed fraud; thus, there is no limit on the time respondent
may assess tax. Sec. 6501(c)(1); Vannaman v. Commissioner, 54
T.C. 1011, 1018 (1970). We hold that the statute of limitations
does not bar respondent from assessing and collecting tax for the
years in issue.
E. Substantial Underpayment of Tax Under Section 6661
Respondent determined that petitioners are liable for the
addition to tax for substantial understatement of income tax
under section 6661. If assessed after October 21, 1986, the
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