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On August 28, 2001, petitioner signed an irrevocable trust
agreement promising to transfer $100,000 by December 31, 2001,
for the benefit of Lillian Talmage, to provide for her health,
education, and support and maintenance during high school,
college, and her church mission.
On October 6, 2001, Mr. Seki died of liver cancer, and his
wife, Liu Hsiu Chen (Ms. Chen), purportedly became NCPL’s CEO.
On April 9, 2002, petitioner filed his 2001 return with a
filing status of single. The 2001 return reported a salary from
an “Overseas Employer” of only $67,850.12 The 2001 return also
reported a taxable distribution of $3,000 and a Schedule F loss
of $9,706, with a tax liability of $7,474. Petitioner’s Schedule
A, Itemized Deductions, for 2001 reported a real estate tax
deduction of $9,545. The 2001 return did not claim a deduction
for interest paid or indicate NCPL was petitioner’s employer.
On June 8, 2002, petitioner married petitioner Annette C.
Talmage.
During 2002, NCPL wire transferred a total of $182,820 to
Kumiko Talmage for petitioner’s child support obligations and for
interest owing on petitioner’s settlement obligation to Kumiko
Talmage. Petitioner did not report the $182,820 as income on
petitioners’ jointly filed Form 1040 for 2002 (2002 return).
12 The record indicates that NCPL made only one $4,000
payment to Kumiko Talmage in 2001 (Mar. 9, 2001).
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Last modified: March 27, 2008