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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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