American Valmar International Ltd., Inc., et al. - Page 12

                                                - 12 -                                                   
            Markovski’s testimony, while respondent relies substantially on                              
            circumstantial evidence that respondent claims negates much, if                              
            not all, of Markovski’s testimony.  We do not agree completely                               
            with either party.  We also decide a deduction issue with respect                            
            to American Valmar and the various additions to tax and                                      
            penalties.  Petitioners bear the burden of proof.  See Rule                                  
            142(a).                                                                                      
            II.  Wire Transfers to American Valmar                                                       
                  During each of its taxable years in issue, American Valmar                             
            received substantial deposits into its bank accounts by wire                                 
            transfers from abroad (the American Valmar deposits).  The                                   
            American Valmar deposits were received principally from countries                            
            in the former Soviet bloc.  American Valmar argues that it was a                             
            commission broker and the American Valmar deposits did not                                   
            constitute gross income because of its obligation to disburse                                
            those deposits as directed by its clients.  Respondent agrees                                
            both that American Valmar was a commission broker and that                                   
            refundable deposits do not constitute items of gross income.                                 
            Respondent is unpersuaded, however, that American Valmar had any                             
            bona fide obligation to its clients.  Respondent argues that                                 
            American Valmar’s books and records did not adequately establish                             
            its liabilities to individual clients, and American Valmar                                   
            treated some of the funds it received as if they were its own.                               
            Respondent adjusted American Valmar’s income by treating the                                 
            American Valmar deposits as gross receipts from sales.                                       




Page:  Previous  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  Next

Last modified: May 25, 2011