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The principal issue in this case is whether
petitioner realized unreported income from his activities
in connection with H&B. A taxpayer does not realize income
by acting as a mere conduit for the transfer of funds on
behalf of another. See Heminway v. Commissioner, 44 T.C.
96 (1965); Teschner v. Commissioner, 38 T.C. 1003, 1007
(1962); Mill v. Commissioner, 5 T.C. 691, 694 (1945); Drew
v. Commissioner, T.C. Memo. 1972-40. However, "When a tax-
payer acquires earnings, lawfully or unlawfully, without
the consensual recognition, express or implied, of an
obligation to repay and without restriction as to their
disposition," then he has realized income. James v.
United States, 366 U.S. 213, 219 (1961); see also Meier
v. Commissioner, 91 T.C. 273, 295 (1988). Thus, we must
determine whether petitioner used the funds he withdrew
from H&B's bank accounts for H&B's benefit, or whether he
converted those funds to his personal use.
Lincoln Mark VII Automobile
During 1988 and 1989, petitioner signed checks drawn
on H&B's First Interstate account and made payable to
Community Bank totaling $4,017.78 and $2,679.04, respec-
tively. These checks represent payments on the loan used
to purchase the Lincoln Mark VII.
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