T.C. Memo. 1999-158
UNITED STATES TAX COURT
LUCIO AMBROSELLI, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 8355-97. Filed May 11, 1999.
Lucio Ambroselli, pro se.
Daniel J. Parent, for respondent.
MEMORANDUM OPINION
GERBER, Judge: Respondent determined a $122,460 income tax
deficiency and a $91,845 fraud penalty under section 66631 for
petitioner’s 1993 taxable year. We consider whether petitioner
should be defaulted in connection with respondent’s motion to
1
Section references are to the Internal Revenue Code in
effect for the period under consideration. Rule references are
to this Court’s Rules of Practice and Procedure.
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dismiss and default petitioner and the Court’s January 8, 1999,
order to petitioner to show cause why he should not be dismissed
and/or defaulted and a decision entered against him.
Discussion
Respondent’s answer in this case contains allegations that
petitioner’s failure to report the income determined was
fraudulent, and petitioner, in his reply, generally denied
respondent’s affirmative allegations. After continuances from
two settings for trial, this case was again set for trial on the
December 7, 1998, San Francisco, California, trial session.
Prior to trial, respondent presented petitioner with a
proposed stipulation of facts, and, after petitioner failed to
respond, respondent filed a motion under Rule 91(f) to compel
petitioner to stipulate or, upon his failure, to cause the
proposed factual stipulations to be deemed established. In our
order dated October 29, 1998, we found that the proposed
stipulations were deemed established and that petitioner’s
"response [refused] broadly to stipulate, was evasive and not
fairly directed to the proposed stipulations."
Petitioner then moved for a continuance from the December 7,
1998, trial session because he was then in Italy, did not want to
travel, was financially unable to pursue this matter, and because
the Federal Bureau of Investigation (FBI) had documents or files
that petitioner was not able to obtain from it. Petitioner,
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however, did not explain the contents of the documents or
information alleged to be in the possession of the FBI and/or
their relevance to or the effect upon this case. Accordingly,
petitioner’s motion for a continuance was denied. He failed to
appear at the December 7, 1998, trial session and/or to prosecute
this matter, and respondent moved that petitioner be dismissed
and/or defaulted and that a decision be entered against him.
Respondent, however, bears the burden of showing that
petitioner is liable for the fraud penalty that was determined.
Sec. 7454(a); Rule 142(b). Respondent attempts to carry that
burden by means of the facts deemed established by the Court’s
order under Rule 91(f). Those facts are as follows:
1. Petitioner resided in California at the time his
petition was filed, and when his 1993 Federal income tax return
was timely filed.
2. Around March 4, 1992, petitioner obtained an insurance
policy covering two paintings that he represented were sealed in
shipping crates in his residence. Petitioner had photographs of
the paintings and claimed them to be "Death of the Dragon" by
Ghirlandaio and "Madonna Con Bambino" by Piero Della Francesca.
It was later shown that the paintings in the photographs were
actually "San Giorgio Che Occide Il Drago" by Paris Borden and
"Madonna Con Bambino con s. Gerolamo e. S. Bartolomeo" (commonly
called "Madonna Della Pera") by Alessandro Bonvicino.
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3. Shortly after obtaining the insurance, petitioner
submitted a claim for a theft he alleged had occurred about May
1, 1992. In addition to the two paintings, petitioner alleged
the theft of a Persian rug, jade statue, and two Russian icons.
4. During 1993, petitioner received, net of attorney's
fees, $365,250 from the insurance company.
5. On April 10, 1995, respondent advised petitioner that
his 1993 tax return had been selected for audit. During the
course of the audit, petitioner represented that the paintings
and other items were stolen from his residence. The paintings
petitioner claimed to possess had been in the possession of the
Vatican art museum for at least 200 years.
6. No theft actually occurred, and a September 8, 1995, FBI
search of petitioner’s residence revealed that petitioner
continued to have possession of the icons and rug. On that same
day, petitioner was indicted on five counts of mail fraud in
violation of 18 U.S. Code sec. 1341 (1994). On February 27,
1996, petitioner pleaded guilty, admitting that no burglary had
occurred and that his insurance claim was fraudulent.
7. Petitioner failed to report the illicit insurance
recovery on his 1993 Federal income tax return.
Respondent may carry his burden by means of facts that are
treated as established in instances where a taxpayer fails to
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appear and prosecute his case. Cf. Coninck v. Commissioner, 100
T.C. 495, 497 n.3 (1993).
Petitioner’s communications with the Court and with
respondent take the position that petitioner will not proceed
without the Government's turning over the documents petitioner
alleges are in the possession of the FBI. As previously noted,
petitioner has not explained how the alleged documents or
information will affect this case. Petitioner’s refusal to
comply with this Court’s Rules (to stipulate under Rule 91 and/or
prepare for trial as required by the Court’s standing pretrial
order) and his failure to appear at trial and "proceed" within
the meaning of Rule 123, are, therefore, without justification.
"Entry of a default decision for the fraud addition in the
instant case therefore is appropriate upon a determination in our
'sound judicial discretion' that the pleadings set forth
sufficient facts to support such a judgment." Smith v.
Commissioner, 91 T.C. 1049, 1058-1059 (1988), affd. 926 F.2d 1470
(6th Cir. 1991) (quoting Bosurgi v. Commissioner, 87 T.C. 1403,
1408 (1986)).
Based on the deemed admitted facts and respondent’s
pleading, we find petitioner intended to conceal, mislead, or
otherwise prevent the collection of his taxes. See Rowlee v.
Commissioner, 80 T.C. 1111, 1123 (1983). Fraudulent intent may
be inferred from a pattern of conduct. See Spies v. United
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States, 317 U.S. 492, 499 (1943). Indicia of fraud may include
understated or unreported income, intentional concealment of
income and assets, and failure to cooperate with taxing
authorities. See Bradford v. Commissioner, 796 F.2d 303 (9th
Cir. 1986), affg. T.C. Memo. 1984-601. Here, petitioner
defrauded an insurance company, lied to respondent by attempting
to conceal his illegal acts and income, and intentionally failed
to report said income.
Based on the above, we hold that petitioner is liable for
the addition to tax for fraud for the 1993 taxable year. With
respect to all other matters determined, respondent does not bear
the burden of proof, and petitioner is found to have failed
properly to prosecute and defaulted on his opportunity to show
respondent’s error(s).
To reflect the foregoing,
An appropriate order and
decision will be entered for
respondent.