Charles J. and Francesca C. Sigerseth - Page 9




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          discussion, petitioners are deemed to have admitted certain                 
          facts.  The deemed admissions were made pursuant to Rule 90(c).             
          By the deemed admissions, petitioners are deemed to admit certain           
          facts, which when taken together, establish that they failed to             
          exercise the due care of a reasonable and ordinarily prudent                
          person under like circumstances.  For example, petitioners are              
          deemed to admit that they invested in abusive trusts and that               
          they refused to cooperate or provide documents to respondent                
          during the examination of petitioners' 1995 and 1996 Federal                
          income tax returns.  We conclude that respondent met his burden             
          of production under section 7491(c) with regard to the accuracy-            
          related penalties determined based on negligence or disregard of            
          rules or regulations.2  See Rule 90(c); Nis Family Trust v.                 
          Commissioner, 115 T.C. 523, 542-543 (2000).  Because respondent             
          met his burden of production through the deemed admissions and              
          petitioners failed to disprove respondent’s determinations (e.g.,           
          by proving reasonable cause), we hold that petitioners are liable           
          for the accuracy-related penalties in issue.  See secs.                     
          6662(b)(1), 6664(c); Higbee v. Commissioner, supra.  In that                
          respect, respondent's motion to dismiss for failure to prosecute            
          insofar as it relies on the deemed admissions will be treated and           
          granted as a motion for partial summary judgment.                           

               2  We therefore need not address respondent’s determination            
          of the accuracy-related penalties based on a substantial                    
          understatement of tax.                                                      





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