Peter S. Pau and Susanna H. Pau - Page 24

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          account, which accords with petitioners' stated practice of                 
          transferring large sums of money from their business accounts to            
          the BNP account to earn greater interest.  Finally, contrary to             
          petitioner's testimony, monthly bank statements reveal that the             
          Bank of America account did not always carry a large balance.               
          Petitioner must have known of the additional income because                 
          otherwise, given the outstanding checks he had written on that              
          account and its prior balance of only $155,874.47, he would have            
          overdrawn the account by almost $45,000.                                    
               4.  Attempts To Conceal Assets                                         
               Susanna instructed Sanrio to pay $840,000 by wire transfer             
          into her nonbusiness account at BNP.  This was the only direct              
          business deposit into that account in 1990.  Sanrio did not issue           
          a Form 1099 for its payment, an error on its part because of the            
          method of payment.  However, petitioners did not request a Form             
          1099, despite petitioner's knowledge of the existence of such a             
          form and his reliance on it in other instances to verify interest           
          and miscellaneous income.                                                   
               Furthermore, although petitioners consulted an accountant              
          about the limit to their home mortgage interest deduction and               
          about amending their return to increase another deduction, they             
          did not discuss applying unrealized capital losses against the              
          $840,000 with an accountant.  In fact, they concealed that income           
          completely from their tax preparer.  Case law is replete with               
          support for holding that petitioners may be liable for the civil            
          fraud penalty as a result of such an action.  See Korecky v.                

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