Investment Research Associates - Page 215




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         III. Fraud Additions to Tax and Penalties                                     
         A.   Positions of the Parties                                                 
              None of the notices of deficiency issued to Ballard, Lisle,              
         and Kanter determined fraud.  At some point in time, respondent               
         saw the need to amend the answers in these cases to assert that               
         petitioners were liable for the fraud additions to tax and                    
         penalties and to increase the deficiencies in tax over those                  
         determined in the notices of deficiency.  The parties and the                 
         Court agreed that the amendments to answers would not be filed in             
         each of these cases until the trial commenced on June 13, 1994.               
         Similarly, it was agreed that replies would be filed at that                  
         time.  Kanter filed a motion to strike portions of respondent's               
         amendments to answer that alleged increases in deficiencies and               
         fraud with respect to transactions unrelated to payments from the             
         Five.                                                                         
              The Court granted Kanter's motion as follows:                            
                   ORDERED that petitioners' motion to strike is                       
              granted to the extent of all adjustments in                              
              respondent's Amendment to Answer for an increased                        
              deficiency in tax and additions to tax as to                             
              transactions or events which are not related to or                       
              constitute part of the transactions which have been                      
              commonly referred to and identified by the parties as                    
              the "Prudential Issues" and/or "the Five" and,                           
              accordingly, such adjustments and the allegations of                     
              such adjustments are hereby stricken from the record of                  
              this case and will be excluded from consideration by                     
              the Court.                                                               
              Respondent filed a motion for reconsideration.  After a                  
         hearing on respondent's motion for reconsideration was held on                





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