Estate of Frank Johnson - Page 125




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          read palms during 1988 and 1989 as well as 1990.  The TV                    
          commercial Katherine filmed during 1988 also gives the impression           
          that she continued to read palms over her entire 50-year career             
          as a palmist.  Our review of the whole record leads us to                   
          conclude that Katherine remained actively involved in her                   
          palmistry business throughout all of the years in issue, and we             
          have so found.  Katherine’s palmistry business constitutes a                
          likely source of funds for the unreported income.                           
               Additionally, the record reveals that both Katherine and               
          Frank gambled during the years in issue.  Thus, the record                  
          supports an inference that gambling provided another likely                 
          source for the unreported income.                                           
               Accordingly, we conclude that respondent has proved likely             
          sources for the unreported income for the years in issue.  The              
          large excess of expenditures over income revealed by respondent’s           
          source and application of funds analysis for the years in issue             
          supports respondent’s determination of unreported income absent a           
          nontaxable source for the expenditures.                                     
                    (2)  Nontaxable Source                                            
               Petitioners contend that Frank and Katherine used a cash               
          hoard Katherine had received from her father during or before               
          1974 to acquire assets and pay expenditures for themselves and              
          for Larry, Ronnie, and Sylvia during the years in issue.  They              
          assert that Katherine’s father gave her about $750,000 in cash              






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