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Petitioner received an extension of time to October 15,
1990, to file his 1989 Federal income tax return. He filed that
return on October 29, 1990.
One of petitioner's European investors was Juerg Aeberhard
(Aeberhard). He lent petitioner $200,000 in 1990. Petitioner
gave Aeberhard a note for $200,000 secured by a mortgage on the
Rockledge Drive property. Petitioner had not repaid any of the
$200,000 to Aeberhard at the time of trial.
C. Respondent's Audit and Determination
Revenue Agent Carmen Elwood (Elwood) audited petitioner's
1989 income tax return. Elwood examined petitioner's financial
records for 1989 and did not find any record that petitioner
received a $200,000 loan in 1989. Petitioner told Elwood that he
received a $200,000 loan from Aeberhard in 1989 that was secured
by a mortgage on petitioner's home. Elwood searched the
courthouse records but did not find a mortgage recorded on
petitioner's home.
On March 1, 1993, Elwood sent a letter written in German to
some of petitioner's investors, including Aeberhard, to ask how
they paid petitioner for his investment services and whether they
had authorized petitioner to use the investment money for
personal purposes. The letter had several grammatical mistakes.
Holger Markmann (Markmann), one of petitioner's investors,
answered the letter in March 1993.
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