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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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