Linda Ruth Palmer - Page 11




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          Rule 142(b); DiLeo v. Commissioner, 96 T.C. 858, 873 (1991),                
          affd. 959 F.2d 16 (2d Cir. 1992).                                           
               "Facts deemed admitted pursuant to Rule 37(c) are considered           
          conclusively established and may be relied upon by the government           
          even in relation to issues where the government bears the burden            
          of proof."  Baptiste v. Commissioner, 29 F.3d 1533, 1537 (11th              
          Cir. 1994), affg. T.C. Memo. 1992-198; see also Doncaster v.                
          Commissioner, 77 T.C. 334, 336-338 (1981) (holding that deemed              
          admissions under Rule 37(c) are sufficient to satisfy the                   
          government's burden of proof with respect to the issue of fraud).           
               "Fraud is defined as an intentional wrongdoing designed to             
          evade tax believed to be owing."  Petzoldt v. Commissioner, 92              
          T.C. 661, 698 (1989).  Whether fraud exists is a question of fact           
          to be resolved upon review of the entire record.  See Gajewski v.           
          Commissioner, 67 T.C. 181, 199 (1976), affd. without published              
          opinion 578 F.2d 1383 (8th Cir. 1978).  Fraud will never be                 
          presumed.  See Beaver v. Commissioner, 55 T.C. 85, 92 (1970).  It           
          may, however, be proved by circumstantial evidence.  See Otsuki             
          v. Commissioner, 53 T.C. 96, 106 (1969).  Courts have relied on a           
          number of indicia or badges of fraud in deciding whether to                 
          sustain the Commissioner's determinations with respect to the               
          additions to tax for fraud including: (1) understating income,              
          (2) maintaining inadequate records, (3) failing to cooperate with           







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