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To the extent we conclude that there are underpayments of taxes,
we must also decide whether the underpayments of taxes by Regal
and Mr. Coyle are due to fraud under section 6663.
Regal and Mr. Coyle each allege that the 3-year period of
limitations under section 6501(a) for each of the tax years at
issue has expired and respondent is precluded from assessing any
underpayments in tax.1
Respondent asserts that the periods of limitations have not
expired under subsections (c)(1) and (e) of section 6501.
Respondent determined that all or part of the underpayments in
tax of Regal and Mr. Coyle were due to fraud under section
6663(a). Thus, respondent asserts that the taxes imposed against
Regal and Mr. Coyle may be assessed at any time under section
6501(c)(1) and the periods of limitations had not expired for the
tax years at issue at the time the notices of deficiency were
issued. In the alternative, respondent relies upon section
6501(e) (substantial omission of gross income) in asserting that
the periods of limitations have not expired with respect to Regal
and Mr. Coyle.
Because an underpayment of tax is critical to a finding of
fraud, we shall first consider whether Regal omitted gross
1 Separate notices of deficiency were issued to Regal and
Mr. Coyle on Apr. 15, 1999. There is no dispute that the notices
of deficiency were mailed beyond the respective 3-year periods of
limitations under sec. 6501(a).
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