Elizabeth Lai - Page 17

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          Hong Lai and Gioni Birkenfeld lent to petitioner to purchase the            
          cashier’s check on their behalf.  As noted supra, loan proceeds             
          do not constitute income to a taxpayer.  Id.  We therefore hold             
          that the amount of the cashier’s check does not represent income            
          to petitioner.7                                                             
               Based on the credible documentary evidence and credible                
          corroborating testimony, petitioner has established by a                    
          preponderance of the evidence that a portion of the disputed                
          determinations is erroneous.  However, petitioner has not carried           
          her burden of proof with regard to the remaining portion of the             
          deficiency.  We therefore partially uphold respondent’s                     

               7  Generally, the Commissioner may assess taxes only within            
          3 years after a taxpayer files his or her income tax return.                
          Sec. 6501(a).  However, if a taxpayer omits from gross income an            
          amount properly includible therein which is in excess of 25                 
          percent of the amount of gross income stated in the return, the             
          Commissioner may assess income taxes for that year at any time              
          within 6 years after the return was filed.  Sec. 6501(e)(1)(A).             
          In the matter before us, the notice of deficiency was issued on             
          Oct. 5, 2004.  Petitioner filed her 1999 income tax return on or            
          about Oct. 20, 2000.  Thus, without regard to application of the            
          sec. 6663 fraud penalty, discussed infra, unless sec. 6501(e)               
          applies, that year falls outside the period of limitations, and             
          respondent may not assess additional tax for 1999.  It appears              
          that the 6-year period of sec. 6501(e) may not apply to                     
          petitioner’s 1999 tax year.  See sec. 6501(e)(1)(A)(i).  If,                
          pursuant to the parties’ Rule 155 calculations, sec. 6501(e) does           
          not apply to petitioner’s 1999 tax year, respondent may not                 
          assess additional taxes for 1999.  Sec. 6501(a).                            

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