- 43 -
We turn first to the interview notes. Although respondent’s
original determination in the deficiency notice was that
petitioner had 1990 embezzlement income from Ms. R. of $15,000,
respondent now contends on brief that the amount is $20,000, less
a repayment of $2,300, or $17,700.8 Respondent bases his
assertion of an increased amount and the partial repayment on the
agent’s notes. We pass over the question whether the increased
deficiency respondent asserts has been properly raised in this
case, because we agree with petitioner that the agent’s notes,
which are the only basis for asserting the increased deficiency,
are inadmissible hearsay.
Respondent argues that the notes qualify for the exception
to the hearsay rule provided in Federal Rules of Evidence
804(b)(3). Respondent maintains that the notes embody a
statement against Ms. R.’s penal interest, because they reflect
Ms. R.’s statement that she earned money as a prostitute.
Respondent, however, does not seek the admission of the notes as
proof of Ms. R.’s illegal profession; respondent seeks their
admission to prove petitioner’s receipt of a net $17,700 in
embezzlement income from her. It is settled that a statement
against interest will not operate as an exception to the hearsay
8 Although respondent on brief repeatedly states the balance
of $20,000 less $2,300 as $17,800, we deem respondent to have
taken the position that petitioner had unreported embezzlement
income from Jennifer R. of $17,700.
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