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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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