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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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