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taxes they knew to be owing. Respondent’s position was based on
petitioners’ omissions of gross income from their 1995 and 1996
Federal income tax returns. Respondent, who did not believe
petitioners’ explanations for such omissions, reasoned that
petitioners’ tax deficiencies could not be due to mere negligence
because petitioners had enough business acumen to operate a
successful business and acquire real estate and other
investments. The Court, however, found petitioners to be
credible. The tax deficiencies were due to petitioners’
negligence and lack of sophistication rather than any intent to
avoid taxes. Petitioners did not intend to conceal income,
mislead respondent, or prevent the collection of income tax.
Accordingly, in a bench opinion rendered on October 17, 2000, we
held that respondent failed to adequately establish that the
underpayments of petitioners’ taxes were due to fraud.
On December 12, 2000, the Court filed petitioner Kolotolu
Liti’s motion for litigation and administrative costs and
petitioner Seini Liti’s motion for litigation and administrative
costs and ordered respondent to file objections to petitioners’
motions. On February 20, 2001, the Court filed respondent’s
objection to petitioners’ motions for litigation and
administrative costs. On March 15, 2001, the Court filed
petitioners’ reply of Seini Liti and Kolotolu Liti to
respondent’s objection to Seini Liti’s motion for litigation and
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