Edward D. Tonitis - Page 5

                                        - 5 -                                         
          Schedules K-1, Shareholder’s Share of Income, Credits,                      
          Deductions, etc., for 1998 and 1999.                                        
               Petitioner’s failure to report the various items of income             
          that he received during the years in issue, his use of sham                 
          trusts to conceal income, his failure to cooperate in determining           
          his tax liability, his submission of correspondence to the IRS              
          espousing frivolous tax-avoidance arguments, and his 4-year                 
          pattern of failing to file Federal income tax returns were all              
          done with the intent to evade tax.                                          
                                     Discussion                                       
               Petitioner never moved to set aside the matters deemed                 
          admitted as a result of his failure to file a reply even when               
          reminded to do so under Rule 37.  He has not contradicted in any            
          way the material facts set forth in the answer, upon which                  
          respondent relies in support of the determination that                      
          petitioner’s failure to file was due to fraud.  He did not file             
          an affidavit in opposition to the motion for summary judgment.              
          However, petitioner was permitted to testify.  See Rule 121(b),             
          (d).  He denied that he intended to defraud the United States and           
          testified:                                                                  
               I relied on the advice of David Simmons, Joseph Sweet,                 
               David Swanson, amongst others, that, you know, as far                  
               as not filing was okay.  I’ve seen what they’ve done,                  
               you know, over the years for the last seven, eight                     
               years, promoting and telling people not to do this, and                
               they’re out there doing it.                                            







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