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to him because he held the funds in his FCIS account, P-B No. 2,
the Sam Han account, Chung No. 1, and Chung No. 2 as an agent of
IL NA Tours. Thus, petitioner contends, the funds belonged to IL
NA Tours, and it should have reported the dividend income for
1988 on its own return. Respondent contends, however, that
petitioner must include the $33,554 in his income for 1988
because the principal in the foregoing brokerage accounts was
under his sole dominion and control when the dividends were
earned, and therefore such dividends were income to him under the
“fruit of the tree” doctrine in Lucas v. Earl, 281 U.S. 111
(1930).
We have concluded and held herein that petitioner exercised
dominion and control over the funds diverted in 1988 and is
taxable on them except to the extent the funds were returned to
custodial accounts within the 1988 taxable year. With respect to
respondent’s original determination concerning the $12,912 in
dividends in the FCIS and P-B No. 2 accounts, we hold that
petitioner has failed to show error in the determination and
accordingly sustain it. The $4,500 dividend on the Kodak stock
in the FCIS account was paid on April 4, 1988, when petitioner
had dominion and control over the FCIS account and before the
Kodak stock proceeds were transferred to a custodial account on
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