- 42 -
Petitioner’s explanations of how the money was invested are
vague, uncorroborated, and/or contradicted by Mr. K.’s credible
testimony. On the basis of the evidence in the record, we are
convinced that petitioner exploited Mr. K.’s trust in her to
obtain the funds in issue, and then did not invest them as she
had represented. As a result, she exercised sufficient dominion
and control over the $13,250 she did not repay to render that
amount taxable to her in 1990. See James v. United States, 366
U.S. at 219 (proceeds over which taxpayer wrongly assumes “actual
command” taxable to him); United States v. Rochelle, 384 F.2d 748
(5th Cir. 1967); O’Sheeran v. Commissioner, T.C. Memo. 1983-702;
see also United States v. Rosenthal, 454 F.2d 1252, 1254 (2d Cir.
1972). We accordingly sustain respondent’s determination.
Respondent determined that petitioner had unreported
embezzlement income of $15,000 in 1990 from an individual named
Jennifer R. Respondent now asserts that petitioner had $17,700
of such income in that year.
Jennifer R. was one of the women who provided escort
services to customers pursuant to petitioner’s arrangements. Ms.
R. died before trial, and the evidence that has been offered with
respect to this item consists of the notes of one of respondent’s
agents concerning an interview he conducted with Ms. R. before
her death, two letter memoranda documenting payments from Ms. R.
to petitioner, and petitioner’s testimony.
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