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belonging to separate entities Ms. Ng owned. However, Ms. Ng
treated accounts belonging to entities she owned as though they
were her personal accounts. As stated previously, she disregarded
the legal ownership of the accounts and commingled personal funds
with funds of the entities she controlled. She also disregarded
legal ownership of the accounts when writing checks. We find that
it was reasonable for respondent to treat the accounts as belonging
to Ms. Ng, as she herself had done.
Upon review of all of respondent's adjustments and supporting
documentation, we conclude that with the exception of certain
amounts deposited into the tip account that we found should be
excluded from Ms. Ng's reconstructed income, and $32,559 of
cancellation of indebtedness income for 1989,1 Ms. Ng had
1 Respondent determined that amounts deposited into
Strong Hope's account at Union Bank were the income of Ms. Ng.
On the books of Strong Hope the deposits were treated as loans to
Ms. Ng. To avoid being whipsawed, respondent increased the
amount Ms. Ng owed to Strong Hope to reflect that the amounts
deposited into Strong Hope's account at Union Bank and used for
her benefit were amounts Strong Hope loaned to Ms. Ng.
Respondent also adjusted the loan balance shown on the books of
Strong Hope as due from Ms. Ng to include expense items that had
been booked as loans from Ms. Ng to Strong Hope but which were
never substantiated by Ms. Ng. The net amount left owing to
Strong Hope by Ms. Ng was $32,559, and respondent took the
position that this debt was forgiven and/or canceled on May 9,
1989, when Strong Hope distributed its one-half interest in 850
Stockton Street to Ms. Ng.
In her posttrial brief, respondent states that if we hold
that "the amounts deposited into Strong Hope's Union Bank account
are the income of Ms. Ng", then respondent concedes that the
forgiveness of income issue should be resolved in favor of Ms.
Ng.
We find that the amounts deposited into Strong Hope's Union
(continued...)
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