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apparent from records and documents summonsed from Hong Kong after
the notice of deficiency was issued and certain other items
ultimately substantiated by Ms. Ng.
During a July 22, 1991, interview, Ms. Ng told the revenue
agent that she had only one foreign bank account from 1986 through
1989, and that only her salary from Ocean City Restaurant and Night
Club, Limited in Hong Kong (Ocean City HK) was deposited into that
account. In response to a discovery request, Ms. Ng's counsel
informed respondent that Ms. Ng had signature authority over 2
foreign accounts, one account at Hang Seng Bank and one account at
Wing Lung Bank, which belonged to Ocean City HK. Ms. Ng refused to
consent to the release of her foreign bank records until ordered to
do so by the U.S. District Court for the Northern District of
California. The revenue agent ultimately discovered, and obtained
records showing, that Ms. Ng had one account at Hang Seng Bank and
six accounts at Wing Lung Bank. The additional income asserted in
the amended answer involves deposits to Ms. Ng's bank accounts at
Hang Seng Bank and Wing Lung Bank.
The revenue agent also analyzed Ms. Ng's cash expenditures.
Those expenditures that could not be traced to a nontaxable source
or reported income were considered unreported income. For example,
the revenue agent included $45,568.68 as unreported income for
1988, which was the amount Ms. Ng paid in cash for a cashier's
check on July 5, 1988, because the revenue agent could not trace
that cash purchase to a nontaxable source.
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