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petitioner that the payments were on account of loans even though
he knew that the payments were on account of computer sales or
services.
Petitioner deposited or caused to be deposited in his
personal bank account substantial amounts of money representing
revenues belonging to PAC’s business. Petitioner deposited or
caused to be deposited into his personal bank account at least
$58,798.44 in 1988, $36,091.69 in 1989, and $50,837.89 in 1990 of
income belonging to PAC that was not reported on either PAC’s or
petitioner’s income tax returns.1
1As discussed infra pp. 16-21, respondent’s determinations
were based on an extremely conservative analysis. During the 3
years before the Court, petitioner deposited $769,612 in his bank
account from sources who failed to respond to respondent’s
requests for information. Respondent treated the deposits from
these unexplained sources as not taxable to petitioner. We
believe that many of these deposits were taxable income that
petitioner diverted from PAC and failed to report. Petitioner
had an additional $695,910 in unidentified deposits. Respondent
also treated these unidentified deposits as nontaxable to
petitioner. Again, we believe that some portion of these
unidentified deposits represented taxable income to petitioner.
Finally, approximately $80,000 of deposits in petitioner’s bank
account represented amounts that were reported by either
petitioner or PAC. Respondent took the position that any amounts
deposited into petitioner’s bank account that were reported as
income by PAC were not taxable to petitioner. Because PAC was a
C corporation, amounts paid by PAC to petitioner would likely
constitute income to petitioner in the form of constructive
dividends. Nevertheless, respondent treated these amounts as
nontaxable to petitioner. Respondent identified as taxable to
petitioner only amounts that respondent could verify were
revenues of PAC that had not been reported on either PAC’s or
petitioner’s Federal income tax returns.
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