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separately, which listed Tokyo, Japan, as his home address.7 The
1998 return reported wages of $58,736, taxable interest of
$4,446, and an exclusion of $58,736 on Form 2555, Foreign Earned
Income, and claimed personal exemptions for petitioner and Kumiko
Talmage and dependency exemptions for their three children
resulting in petitioner’s calculation of “0” taxable income. The
1998 return did not claim a deduction for interest paid.
The total funds wire transferred by NCPL to SSI for the
development of the Rivercliff property during 1999 were
$2,119,464. Petitioner did not report the $2,119,464 as income
on his Form 1040 for 1999 (1999 return).
On March 15, 2000, the Talmages separated, and Kumiko
Talmage moved from the Rivercliff property to an apartment in
Gresham, Oregon. From March 15 through June 12, 2000, she
withdrew $120,582 from the family bank accounts.
On May 11, 2000, petitioner untimely filed his 1999 return
with a filing status of married filing separately, which listed
Tokyo, Japan, as his home address. The 1999 return reported
$76,560 of foreign earned income on Form 2555 and claimed a
maximum foreign earned income exclusion of $74,000, but it did
not report the $2,560 excess as wages on line 7 of page 1 of Form
1040. The Form 2555 reported that petitioner, Kumiko Talmage,
7 In April 1999, petitioner filed an extension to extend the
filing date for his 1998 return to Aug. 16, 1999.
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Last modified: March 27, 2008