Walter L. Medlin - Page 39

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          business.  Respondent has shown by clear and convincing evidence            
          the likely source of the $59,000; i.e., petitioner’s real estate            
          business.  Petitioner was regularly engaged in the real estate              
          business during 1985, and he received a substantial amount of               
          unreported income during that period from that business.82                  
          Petitioner did not maintain adequate records for his real estate            
          transactions or development activities, and there is substantial            
          evidence of an intent to conceal income received in that                    
          business.  Given those circumstances, we find that the real                 
          estate business provides a likely source for the $59,000                    
          cashier’s check.                                                            
               Petitioner argues, on the other hand, that the $59,000                 
          cashier’s check is traceable to a $70,000 check from Washington             
          International, and that check represents a loan.  Petitioner                
          contends that respondent has not proven this source to be a                 
          taxable source and that, indeed, he was aware of this $70,000               
          check during the examination, but he did not classify it as                 
          income.  First, we note that respondent, having shown a likely              
          taxable source for the $59,000 deposit, does not bear the burden            
          of negating nontaxable sources alleged by petitioner.  Holland v.           


               82Petitioner’s financial statement dated Nov. 15, 1985, also           
          reveals certain items of income receivable in petitioner’s real             
          estate business that could provide a likely source of the                   
          deposit.  For example, the financial statement shows notes and              
          mortgages receivable of $329,210, annual income from rentals of             
          $40,000, and “Projected annual income from Monarch Realty” of               
          $40,000.                                                                    




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