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staff. It also received all of the income earned in the
dermatology practice, collected moneys due to the dermatology
practice from insurance companies and patients, paid the
dermatology practice’s business expenses, and purchased the
dermatology practice’s supplies.
In sum, respondent has established a source for the
$1,149,048 in determined unreported income, he has shown that
petitioner beneficially owned BBL and that BBL had $1,149,048 of
undistributed earnings and profits at the start of 1996, and he
has demonstrated the steps by which petitioner converted the
$1,149,048 of BBL’s earnings and profits from BBL to her personal
accounts in 1996. Petitioner, in turn, has put forth no
probative evidence to the contrary, leading to the inference that
such evidence if produced would have been unfavorable to her.
See, e.g., Wichita Terminal Elevator Co. v. Commissioner, 6 T.C.
1158, 1165 (1946), affd. 162 F.2d 513 (10th Cir. 1947); see also
McKay v. Commissioner, 89 T.C. 1063, 1069 (1987) (failure of
witness to testify to fact peculiarly within his knowledge
suggests that testimony would have been unfavorable), affd. 886
F.2d 1237 (9th Cir. 1989). We hold that respondent determined
correctly in the notice of deficiency that petitioner had
unreported dividend income of $1,149,048 for 1996.
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