Cheng C. and Susan L. Kao, et al. - Page 6

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            including notes, letters, and records prepared by Dr. Kao or Ms.                          
            Tu.  Some of the documents are not reliable and do not contain                            
            any credible indicia of contemporaneous communications (e.g.,                             
            postmark dates).  Other documents either do not support                                   
            petitioners' contentions (e.g., bank records do not establish the                         
            source of funds) or, in some cases, contradict petitioners'                               
            testimony (e.g., bank records indicate that Dr. Kao transferred                           
            funds from overseas to Kolyn, while he testified to the                                   
            contrary).  In short, petitioners have failed to meet their                               
            burden of proof.                                                                          
                  We disagree with respondent, however, with respect to                               
            $6,777,319 attributed to the Kaos based on a bank deposits                                
            analysis of Kolyn's accounts.  Respondent's bank deposits                                 
            analysis of Kolyn's accounts is not persuasive evidence of the                            
            Kaos' receipt of income.  Respondent has not provided substantive                         
            evidence or a plausible theory to establish that the Kaos                                 
            received these funds.  As a result, we reject respondent's                                
            determination that $6,777,319 deposited into Kolyn's accounts is                          
            taxable to the Kaos.  Cf. Weimerskirch v. Commissioner, 596 F.2d                          
            358, 362 (9th Cir. 1979), revg. 67 T.C. 672 (1977) (holding that                          
            the Commissioner's determination was arbitrary and erroneous,                             
            because the Commissioner did not provide "substantive evidence"                           
            linking the taxpayer with the receipt of income).                                         
            II.  Additions to Tax and Accuracy-Related Penalties                                      






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