Meri R. and William R. Kaufman - Page 8

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          T.C. 661, 687-688 (1989).  In such circumstances, respondent must           
          come forward with evidence establishing a minimal foundation,               
          which may consist of evidence linking the taxpayer with an                  
          income-producing activity.  Weimerskirch v. Commissioner, supra             
          at 360-361; Petzoldt v. Commissioner, supra at 689.                         
               Here, all of the facts upon which respondent relies to link            
          Ms. Kaufman with criminal activity and to demonstrate the amount            
          of misappropriated funds have been deemed admitted by operation             
          of Rule 37(c).  It is well established that “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.  Based on the deemed admissions           
          in this case, we conclude that there exists no issue of material            
          fact as to Ms. Kaufman’s receipt of unreported income and her               
          liabilities for the income tax deficiencies thereon for 1993                
          through 1995.  Accordingly, we sustain as a matter of law                   
          respondent’s determination with respect to the income tax                   
          deficiencies in the statutory notice.                                       
          II.  Fraud Penalties                                                        
               Section 6663(a) provides for the imposition of a penalty in            
          “an amount equal to 75 percent of the portion of the underpayment           
          which is attributable to fraud.”  In addition, section 6663(b)              

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