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whether petitioner’s position is correct. That is because,
pursuant to Rule 37(c), petitioner is deemed to have admitted,
inter alia, each of the affirmative allegations in respondent’s
amendment to answer relating to the claimed cost of goods sold
for 1993.
Rule 37(c) provides that, where a reply is filed, every
affirmative allegation set out in the answer and not expressly
admitted or denied in the reply is deemed to be admitted.21 In
the instant case, petitioner filed a reply to respondent’s
amendment to answer which expressly denied certain of the affir-
mative allegations in that amendment to answer. That reply did
not expressly deny (or admit) the affirmative allegations in
respondent’s amendment to answer relating to the additional
amount of the claimed cost of goods sold for 1993 that respondent
alleged therein should be disallowed.22 We find that, pursuant
to Rule 37(c), petitioner is deemed to have admitted the affirma-
tive allegations in respondent’s amendment to answer relating to
the cost of goods sold for 1993.
We conclude that, except for the fraud penalty under section
21Where a reply is not filed, the affirmative allegations in
the answer are deemed to be denied unless the Commissioner,
within 45 days after the expiration of the time for filing the
reply, files a motion that specified allegations in the answer be
deemed admitted. Rule 37(c). Such a motion may be granted
unless the required reply is filed within the time directed by
the Court. Id.
22In fact, petitioner’s reply to respondent’s amendment to
answer did not contain any statement addressing any of the
affirmative allegations in respondent’s amendment to answer
relating to the claimed cost of goods sold for 1993.
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