                        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.
