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Otsuki v. Commissioner, 53 T.C. 96, 106 (1969), respondent has
marshaled considerable affirmative evidence that petitioner
substantially overstated the basis reported with respect to the
sale of the Sir Winston and Sir Winston II in 1996 and 1997,
respectively.
In an effort to verify petitioner’s reported basis,
respondent subpoenaed the records of the checking and credit card
accounts that petitioner indicated he maintained during the
relevant periods. Based on petitioner’s representation that the
capital improvements he made to the Sir Winston and Sir Winston
II were all made within the 1-year period following his
acquisition of each vessel, respondent undertook an analysis of
all expenditures made during those periods through the checking
and credit card accounts then held by petitioner19 to identify
expenditures that could have been for capital improvements to the
vessels. With respect to the checking accounts, respondent
sought to identify checks for possible capital improvements by
excluding all checks that could not have been for that purpose.
Respondent first excluded all checks that, on their face, could
not have been for capital improvements, such as checks for
utilities, docking fees, taxes, insurance, and the like.
Respondent was able to exclude other checks based on evidence in
19 We note that respondent’s analysis covered records of
joint checking accounts that petitioner held with his ex-wife,
including those that she conceded taking.
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