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Discussion
1. Unreported Income
Respondent contends that during the course of the
examination, petitioner provided inconsistent explanations
regarding the source of the cash deposits. According to
respondent, petitioner failed to establish that the cash deposits
were from nontaxable sources, and therefore the cash deposits
represent income to petitioner. See Ruark v. Commissioner, 449
F.2d 311, 312 (9th Cir. 1971), affg. per curiam T.C. Memo. 1969-
48. By calling the Court’s attention to petitioner’s
relationship to and involvement with Submarine 21, respondent
suggests, if only by implication, that the source of the cash
deposits was compensation that petitioner received for working in
the sandwich shop.
Petitioner readily admits that he worked long hours at the
sandwich shop during 1995, but claims that he received no
compensation at all for his efforts. We understand that
Submarine 21 was, as petitioner described it, a family business,
and therefore, he did not expect to be, and was not, compensated
as an unrelated employee might have been. Nevertheless, we find
it difficult to accept petitioner’s claim that he received no
compensation whatsoever for his efforts, particularly when the
extent of those efforts is considered.
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Last modified: May 25, 2011