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funds in dispute were derived from nontaxable sources. Rule
142(a); Tokarski v. Commissioner, 87 T.C. 74 (1986); see also
Rockwell v. Commissioner, 512 F.2d 882, 885-887 (9th Cir. 1975).
We turn to an examination of the facts concerning the two alleged
sources of the deposits.
Funds From Mr. Zurn
Petitioner's relationship with Mr. Zurn may be described as,
to say the least, confusing. Indeed, there is even confusion as
to when petitioner and Mr. Zurn became associated. Petitioner
testified that he met Mr. Zurn in 1984. However, in a prior
trial involving Mr. Zurn's tax liabilities, petitioner testified
that they became associated in 1987, or possibly 1986. This date
is important because petitioner alleges that he received funds
from Mr. Zurn in 1985 and 1986 to construct an apartment building
(referred to herein as the Montrose property). Petitioner's
version of the events, however, is questionable in light of a
loan application dated July 14, 1986, in which petitioner stated
that he was receiving monthly rental income from the Montrose
property in the amount of $5,640. Finally, there is the peculiar
grant deed dated August 2, 1985, purportedly conveying the
Montrose property to Mr. Zurn and a John Nuckols. Petitioner
testified that at the time he conveyed the property to Messrs.
Zurn and Nuckols, Mr. Zurn had advanced at least $50,000 to
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