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drawn on the Sam Han account was deposited into ANB No. 3, a
custodial account governed by the TRO. On October 14, 1988, the
TRO was amended specifically to cover the Sam Han account. The
account contained assets of $137,128 at yearend 1988. Pursuant
to the settlement agreement, (i) in January 1991, petitioner and
his corporations received $94,722 and Northwest received nothing
from ANB No. 3, and (ii) on April 1, 1991, Northwest received the
balance remaining in the Sam Han account, which at that time was
$196,441. See supra note 26.
The $450,000 that petitioner transferred to the Sam Han
account from corporate accounts, together with the “net” of
$536,856 in funds taken from and not returned to the corporate
Albank No. 1 account by yearend, make up the $986,856 that
respondent asserts in an amendment to his answer was diverted by
petitioner from his corporations in 1988.
Respondent contends that the entire $986,856 is ordinary
income which must be included in petitioner’s income for 1988.
In the alternative, respondent contends that the $986,856 should
be deemed a distribution from IL NA Tours in excess of
petitioner’s basis in the stock which must be included in his
income for 1988. The unreported income issue constitutes new
matter resulting in an increased deficiency. Respondent has the
burden of proving any new matter or increased deficiency. Rule
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