Cunningham v. Commissioner

MEMORANDUM OPINION

PARKER, Judge: By statutory notice of deficiency dated April 4, 1984, respondent determined deficiencies in and additions to petitioners' Federal income taxes as follows:

Following a rather complex and convoluted procedural odyssey, ² this case is now before the Court on respondent's motion for summary judgment pursuant to Rule 121. Although petitioners were accorded an opportunity to file an opposing written response, with or without supporting affidavits, they have not availed themselves of that opportunity nor responded in any other way.

*383 Under Rule 121, a summary adjudication may be made "if the pleadings, answers to interrogatories, depositions, admissions, and any other acceptable materials, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law." Rule 121(b). The party opposing the motion cannot rest upon the allegations or denials in his pleadings, but must "set forth specific facts showing that there is a genuine issue for trial." Rule 121(d). The moving party, however, bears the burden of proving that there is no genuine issue of material fact, and factual inferences will be read in a manner most favorable to the party opposing summary judgment. ; ; . Here, petitioners have not responded to the motion for summary judgment, and it could be said that respondent's motion is wholly unopposed.

With respect to additions to tax under section 6653(b), respondent has the burden to prove by clear and convincing evidence*384 (1) that an underpayment of tax exists for each year and (2) that a part of the underpayment of tax each year is due to fraud with the intent to evade tax. Sec. 7454(a); Rule 142(b); ; . Respondent's burden of proof can be met by facts deemed admitted under Rule 37(c) or under Rule 90(c). ; ; .

Here, the facts in respondent's request for admissions are deemed admitted for all purposes in this case. Rule 90(c); , affd. on another issue . Those deemed admitted facts are here incorporated by this reference and are so found by the Court. Because of the length and detail of those established facts, the Court will merely summarize the highlights below.

At the time the petition in this case was filed, petitioners Johnnie Cunningham and Pauline Cunningham, husband and wife, resided*385 in Alton, Missouri. During all the years before the Court, Mr. Cunningham was a farmer. Each year before the Court, petitioners received substantial amounts of taxable income from the farming operation that they omitted from their tax return. Each year petitioners failed to maintain complete and accurate books and records of their income-producing activities.

Respondent determined the amounts of unreported taxable income by the bank deposits and cash expenditures method, as set out in the statutory notice of deficiency. The figures in Exhibits A through D of the deficiency notice are established by the various paragraphs of the request for admissions and the documents attached to that request. Briefly, these established facts in summary form show the following:

As a result of unreported gross income petitioners also understated their taxable income for the years 1975 through 1978 in the amounts of $ 10,463.60, $ 28,056.53, $ 50,429.38, and $ 70,372.40, respectively. This of course resulted in the underpayments of tax set out in the deficiency notice.

During the years 1975 through 1978, petitioners did not receive any nontaxable or excludable income, receipts, cash or other assets other than as included above. During that period they did not receive any gifts, inheritances, legacies, or devises.

Petitioners failed to report the above amounts of gross income, understated their taxable income, and underpaid their taxes for the years 1975 through 1978 with the intent to evade taxes. Petitioners' failure to maintain complete and accurate books and records of their income-producing activities for the years 1975 through 1978 and their failure to produce complete and accurate records to respondent in connection with the examination of their returns were due to fraud with intent to evade tax. Also, *387 for 1979 petitioners, in computing income for income averaging purposes, used the base period income figures for the years 1975 through 1978 that they knew were false and fraudulent and used those figures with the intent to evade tax for the year 1979.

Based on these deemed admissions respondent has satisfied his burden of proving that no genuine issue of material fact exists. Also, the facts deemed admitted under Rule 90(c) are sufficient to establish by clear and convincing evidence that there was an understatement of income each year, an underpayment of tax each year, and that some portion of that underpayment of tax each year was due to fraud with intent to evade tax. ³ Accordingly, respondent's motion for summary judgment will be granted as to both the deficiencies and additions to tax for fraud as set forth in the notice of deficiency.

An appropriate order will be entered.