Carl C. Poston III and Sherea A. Poston - Page 6

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          manner most favorable to the party opposing summary judgment."              
          Marshall v. Commissioner, 85 T.C. 267, 271 (1985).                          
               Respondent determined that petitioners are liable for the              
          additions to tax for fraud, which requires respondent to                    
          establish, by clear and convincing evidence, that there is an               
          underpayment of tax and that some portion of that underpayment is           
          due to fraud.  See sec. 7454(a); Rule 142(b); DiLeo v.                      
          Commissioner, 96 T.C. 858, 873 (1991), affd. 959 F.2d 16 (2d Cir.           
               "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).  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               

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