Midland & Assoc. withdrawals
C.H.I.E. A/C
Marine 921-11974-7 John J. Burke checks to 23,658.95 413,038.00 20,540.00
Midland & Assoc. Ard Rhei/
Jury's, John
Burke, and cash
Bank of 01-3-401414-1 John J. Burke checks to 7,500.00
Smithtown & Assoc. cash, John
Expense A/C Burke, and
employees
Bank of 01-6-400247-9 John J. Burke checks to 66,900.00
Smithtown or Vivian cash, Ard
Burke Rhei, and
John Burke
Marine 921-11976-3 John J. Burke noncash 112,050.00 87,984.00 34,706.07
Midland & Vivian deposits
Burke
Total income $263,609.00 $593,322.00 $90,646.00
OPINION
Additional Income
Respondent determined that Mr. Burke failed to report income in the
amount of $59,648, $242,669,9 and $50,746 on the delinquent returns that he
filed for 1985, 1986, and 1987, respectively, and that the source of this
income was money that Mr. Burke diverted from U.S. Life premium funds. Mr.
Burke contends that the amounts in question constituted either loans from U.S.
Life10 or money that was embezzled by his employees.
9This includes $22,448 in addition to the amount determined in the notice
of deficiency. See supra note 1.
10We note the inconsistencies in Mr. Burke's position. On brief, Mr.
Burke admitted that he "often withdrew sums in excess of his actual commission
entitlement [and that] [s]uch excess withdrawals were treated * * * [as] loans
due from Mr. Burke to the Life insurance company." However, when asked by
respondent at trial if he characterized his use of MPC account funds as loans,
Mr. Burke denied even using funds from the premium accounts. Nevertheless,
when questioned again about this issue later in the trial by his own counsel,
Mr. Burke explained: "They [U.S. Life] had the option of treating it [Mr.
Burke's withdrawal of funds in excess of his commissions] like a loan, okay.
They, however, never exercised that option. They never charged me any
interest."
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