Charles R. Harp and April B. Harp - Page 34

                                                                               - 34 -- 34 -                                                                                
                    petitioners' income for each of the years at issue, as we stated                                                                                       
                    above, the deposits at issue are prima facie evidence of income,                                                                                       
                    and petitioners bear the burden of proving that those deposits                                                                                         
                    are not taxable.22  See Calhoun v. United States, 591 F.2d at                                                                                          
                    1245; Marcello v. Commissioner, 380 F.2d at 511; Tokarski v.                                                                                           
                    Commissioner, 87 T.C. at 77.  As we understand petitioners'                                                                                            
                    position, they contend that no portion of the deposits into                                                                                            
                    petitioners' accounts of (1) K & H's construction loan proceeds,                                                                                       
                    checking account funds, and credit line funds and (2) Ms.                                                                                              
                    Velilla's construction loan proceeds and checking account funds                                                                                        
                    is includible in their income for each of the years 1989 and 1990                                                                                      
                    because petitioners held those deposits "for corporate purposes                                                                                        
                    and subject to an obligation which Mr. Harp recognized to return                                                                                       
                    the funds to the corporation."  Respondent disagrees with those                                                                                        
                    contentions, arguing that those deposits represent funds misap-                                                                                        
                    propriated by petitioner and that, to the extent that during each                                                                                      
                    of the years at issue petitioners did not use those deposits                                                                                           
                    during each such year to make payments to, or on behalf of, K & H                                                                                      
                    and Ms. Velilla, they are taxable to petitioners under the                                                                                             
                    principles of James v. United States, 366 U.S. 213 (1961).                                                                                             
                              Regardless whether petitioner's actions during the years at                                                                                  
                    issue regarding K & H's and Ms. Velilla's funds are characterized                                                                                      


                    22  As noted above, the parties agree that petitioners' returns                                                                                        
                    for 1989 and 1990 did not include as income any of the deposits                                                                                        
                    during each of those years of K & H's and Ms. Velilla's funds.                                                                                         




Page:  Previous  24  25  26  27  28  29  30  31  32  33  34  35  36  37  38  39  40  41  42  43  Next

Last modified: May 25, 2011