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that he failed to report the income, not to evade tax, but
because he viewed the payment as a short-term capital gain which
he intended to offset by capital losses from his interest in
Regent when such losses were realized. The Court discounts this
explanation as an afterthought. See Gajewski v. Commissioner, 67
T.C. at 202. Petitioner had at least two clear opportunities to
offer this explanation to Clement before petitioners retained
counsel, yet he said nothing.
Even if we did not regard petitioner's explanation as a
recent fabrication, we find highly improbable his testimony that
he viewed the income received from Sanrio as capital, rather than
ordinary, in nature. Although his wife usually engaged in
brokerage sales for Sand Hill, petitioner was familiar with real
estate practices. The evidence overwhelmingly suggests that
Sanrio viewed petitioner merely as an agent, and that petitioner
knew of his role as intermediary. Petitioner wrote a letter to
Sanrio before the Agreement was signed describing his fee.
Moreover, Sanrio reimbursed petitioner for his out-of-pocket
expenses. Petitioner signed the agreement, rather than Sanrio,
due to the seller's antipathy toward Sanrio. Cf. Solomon v.
Commissioner, 732 F.2d at 1461. Consequently, petitioner must
have known that the $840,000 was a commission and therefore
ordinary income against which, he was aware, capital losses could
not be applied. His explanation is incongruous with these
circumstances.
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