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partnership distribution on his return was not due to these
badges of fraud. During 2000, petitioner also overstated
itemized deductions, but respondent does not contend, nor would
we find based on the record, such overstatement was due to
fraud.14 Therefore, petitioner is not liable for a penalty under
section 6663 for the year 2000.
2001
Respondent determined that petitioner is liable for a fraud
penalty under section 6663 for the year 2001. It was deemed
admitted under Rule 37(c) that petitioner fraudulently,
knowingly, intentionally, and willfully received $49,101 of
unreported taxable income for the year 2001. However, $48,419 of
that amount was conceded by respondent. In addition to the
remaining $683 taxable partnership distribution, respondent
alleged in his amended answer that petitioner received, but
fraudulently did not report, $19,233 of taxable income. Fraud
was not deemed admitted with respect to this amount. We now must
decide whether respondent has met his burden.
Petitioner’s conduct exhibits many of the badges of fraud
listed above. He understated his income. He not only kept
inadequate records; he kept no records. He filed his tax return
for the year 2001 approximately 31 months late. He concealed
14Respondent does not seek fraud penalties under sec. 6663
for the portion of the underpayments attributable to petitioner’s
unsubstantiated deductions for any of the years at issue.
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