Court Opinion

ID: 4334531
Source: CourtListenerOpinion
Date Created: 2018-11-14 01:42:48.829231+00
Date Added: 2024-06-11T14:47:58.272500
License: Public Domain

WALTER L. MEDLIN, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, RespondentMedlin v. Comm'rNo. 2615-98 United States Tax CourtT.C. Memo 2003-224; 2003 Tax Ct. Memo LEXIS 224; 86 T.C.M. (CCH) 141; T.C.M. (RIA) 55246; July 29, 2003, Filed *224  Petitioner had unreported income from various real estate transactions, from commissions, interest, and rents for years in issue. Respondent's determinations as to whether undisclosed deposits represented taxable income to petitioner sustained in part. With respect to the 1985 tax year, addition to tax under section 6653(b)(1) applied to entire underpayment; with respect to 1986, 1987, and 1988 tax years, respondent satisfied his initial burden, and additions to tax for fraud for those tax years applied to entire underpayment unless petitioner can show specific portion of underpayment that was not due to fraud. Addition to tax under section 6653(b)(2) was not applicable to that portion of underpayment attributable to gain realized from foreclosure sale in 1985.  *225 David D. Fussell and Mark L. Horwitz, for petitioner.James F. Kearney, Benjamin A. de Luna, and Robert W. Dillard, for respondent.  Ruwe, Robert P.RUWE*226 RUWE, Judge: Respondent determined deficiencies in petitioner's Federal income taxes and additionsto tax as follows:Additions to TaxSec.Sec.Sec.Sec.YearDeficiency6653(b)(1)6653(b)(2)6653(b)(1)(A)6653(b)(1)(B)1995$ 86,533$ 43,73650% of the------Interest Due on $ 87,4711986165,732 ------$ 124,34050 % of theInterest Due on $ 165,7871987309,456 ------232,092 50% or theInterestDue on$ 309,456198864,910 51,021 ---------*227  After concessions, 1 the issues for decision are: (1) Whether petitioner had unreported income from various real estate transactions, from commissions, interest, rents, and unidentified deposits for the years in issue; (2) whether petitioner is liable for additions to tax for fraud under section 6653(b); 2 and (3) whether assessment of the alleged *228 deficiencies is barred by the statute of limitations. For convenience and clarity, general findings of fact are discussed first followed by a statement of general legal principles applicable to this opinion; separate findings of fact and opinion are then set forth for each item of unreported income. Finally, we discuss whether the additions to tax for fraud apply and whether assessment is barred by the statute of limitations.*229 *230 *231            GENERAL FINDINGS OF FACTSome of the facts have been stipulated and are so found. The stipulation of facts and the attached exhibits are incorporated herein by this reference. At the time of filing the petition, petitioner resided in Kissimmee, Florida.Since the 1960s through the present, petitioner has been engaged in the business of buying and selling real estate, as well as real estate development. Petitioner used Donna Allen (Ms. Allen), Michael Johnson, 3 and R. Stephen Miles, Jr. (Mr. Miles), as trustees for the buying and selling of real estate. Ms. Allen's and Mr. Johnson's only duties as trustees were to hold title to the various properties in trust.*232  Petitioner met Ms. Allen in 1971, and since 1974, she has worked for petitioner as a bookkeeper, secretary, and housekeeper. Petitioner and Ms. Allen had a child together in 1982. The child lived with Ms. Allen from 1982 through 1990. Petitioner agreed to pay child support of $ 50,000 per year to Ms. Allen. Since 1975, petitioner has given real property and two Ferrari automobiles to Ms. Allen. Petitioner owed Ms. Allen money for a number of different things, including child support.Mr. Miles is an attorney in the State of Florida, and he has known petitioner since 1959. He has been petitioner's real estate attorney since 1975, and he started acting as a trustee for petitioner at that time. As trustee, Mr. Miles did whatever petitioner instructed him to do. Mr. Miles held the proceeds from petitioner's sales of real estate in his law firm's trust account. Alana Goodman was a bookkeeper for Mr. Miles's law firm, and she maintained ledger cards which reflected the identity of properties held in trust, the date that funds were deposited or disbursed, and the amounts that were deposited and disbursed from the law firm's trust account.On several occasions, petitioner instructed Mr. *233  Miles or Ms. Goodman to disburse his funds from the law firm's trust account for various payments: (1) On December 23, 1985, a house payment of $ 51,266.25 was paid to Walter E. and Maxine Melitshka from the trust account with respect to petitioner's personal residence; (2) on May 15, 1987, a house payment of $ 71,266.25 was paid to Mr. and Mrs. Melitshka with respect to petitioner's personal residence; (3) on May 21, 1987, petitioner's accountant, John F. Kelly, was paid $ 12,187.50; (4) on June 15, 1987, $ 32,500 was paid for the purchase of a 1960 Ferrari; 4 (5) on July 2, 1987, Ms. Allen was paid $ 31,800; (6) on July 9, 1987, income taxes of $ 8,472 were paid to the Internal Revenue Service (IRS); (7) on July 28, 1987, $ 12,000 was paid to Mid America Exotic Auto Sales; (8) on July 30, 1987, income taxes of $ 1,482 were paid to the IRS; (9) on September 17, 1987, child support of $ 10,000 was paid to Ms. Allen; (10) on October 9, 1987, a house payment of $ 30,000 was paid to Mr. and Mrs. Melitshka with respect to petitioner's personal residence; (11) on November 2, 1988, political contributions of $ 2,800 were paid. None of those payments from the law firm's trust account were*234  reported as income by petitioner.Mr. Kelly prepared petitioner's Forms 1040, U.S. Individual Income Tax Returns, for 1983 through 1988. 5 Petitioner provided Mr. Kelly with spreadsheets which reflected deposits into, and expenditures from, petitioner's bank accounts for the years 1983 through 1988. 6 Those spreadsheets provided the basis for preparing petitioner's tax returns for those years: The income reported on the returns reflected deposits into petitioner's bank accounts, less any deposits that were classified as loan proceeds. Any amounts not deposited into petitioner's bank accounts were not reported as income. Petitioner did not provide Mr. Kelly with checks, real estate contracts, real estate closing statements or any other books or records to prepare his income tax returns. Petitioner did not inform Mr. Kelly that the proceeds from his real*235  estate sales were deposited in Mr. Miles's law firm's trust account, and those proceeds were not reflected on the spreadsheets. Petitioner did not inform Mr. Kelly of any additional income. Throughout the 1980s and 1990s, petitioner asked Mr. Kelly questions about the requirements for like-kind exchanges.Petitioner requested extensions for the filing of his income tax returns for 1985, 1986, 1987, and 1988. Petitioner's Form 2688, Application for Extension of Time to File U.S. Individual Income Tax Return, for the 1985 tax year states as his*236  need for an extension: "Client derived substantially all his income from a bulk land transaction, which was extremely complex. Additional time is needed to analyze the transaction." Petitioner did not provide any information to Mr. Kelly regarding any bulk land sale transaction. Petitioner requested an extension for tax years 1986, 1987, and 1988, because "Taxpayer has not received all needed K- 1's for 1065 & 1120 tax returns that represent a substantial portion of his income. Without these items a complete and accurate return cannot be prepared." Petitioner provided no Schedules K-1 to Mr. Kelly. 7On petitioner's Form 1040, Schedule C, Profit or (Loss) From Business or Profession, for 1985, petitioner listed his principal business or profession*237  as "Real Estate Development". Petitioner reported no income from gross receipts or sales, but he did report $ 160,363 as "Other income Commissions, Fees & Interest" and claimed deductions of $ 152,481. See appendix A. Petitioner reported a net profit from his real estate development business of $ 7,882 on his Form 1040. This was the only amount petitioner reported as income for 1985. Petitioner reported taxable income of $ 5,802 and a tax of $ 426.On petitioner's Form 1040, Schedule C, for 1986, petitioner listed his principal business or profession as "Real Estate Development". He likewise reported no income from gross receipts or sales, reported $ 119,772 as "Other income Commissions, Fees & Interest", and claimed deductions of $ 115,634. See appendix A. Petitioner reported a net profit from his real estate development business of $ 4,138 on his Form 1040. This was the only amount petitioner reported as income for 1986. Petitioner reported taxable income of $ 2,058 and a tax of $ 0.On petitioner's Form 1040, Schedule C, for 1987, petitioner listed his principal business or profession as "Real Estate Development". He reported no income from gross receipts or sales, reported $ *238  138,653 as "Other income * * * Fees, int, & Sales", and claimed deductions of $ 94,434. See appendix A. Petitioner reported a net profit from his real estate development business of $ 44,219 on his Form 1040. This was the only amount petitioner reported as income for 1987. Petitioner reported taxable income of $ 37,879 and a tax of $ 7,515.On petitioner's Form 1040, Schedule C, for 1988, petitioner listed his principal business or profession as "Developer/Real Estate". Petitioner reported $ 61,921 as income from gross receipts or sales, reported no "Other income", and claimed deductions of $ 43,713. See appendix A. Petitioner reported a net profit from his real estate development business of $ 18,208 on his Form 1040. This was the only amount petitioner reported as income for 1988. 8 Petitioner reported taxable income of $ 5,206 and a tax of $ 784.In 1985, petitioner purchased a ring, earrings, and two necklaces for*239  Ms. Allen as a gift. Those items cost $ 14,540, which petitioner deducted as commissions paid on Schedule C of his 1985 tax return. Petitioner deducted the costs of his subscriptions to Playboy and Penthouse magazines on his 1986 tax return as Schedule C business expenses.The trusts that petitioner used did not file tax returns for any of the tax years at issue. During 1985-88, petitioner never informed Mr. Miles that petitioner believed that he had no obligations to report his earnings from the trust transactions, because they supposedly involved tax free exchanges.Petitioner used the fictitious names "John Waltin" 9 and "William R. Wright" in some of his real estate transactions during the tax years at issue. Petitioner signed various real estate documents as "William R. Wright". Petitioner signed that name as a notary public on real estate documents and on articles of incorporation filed with the State of Florida. Petitioner used and signed the name "D. W. Davis" to purchase and sell real estate. He opened a bank account in that name without the knowledge of Mr. Davis. At one time, petitioner was a notary public in the State of Florida; however, his license expired. Petitioner*240  continued to notarize documents after his license expired.Mr. Miles held properties in land trusts, which we refer to as the Mefford Property (OS-22) and Susan's Lakefront Estate (OS- 03). Mr. Miles, as trustee, applied for and received an employer identification number for those land trusts. Respondent requested tax returns from Mr. Miles for the land trust holding the Mefford Property for 1985, 1986, and 1987. Respondent also requested tax returns from Mr. Miles for the land trust holding Susan's Lakefront Estate for 1984, 1985, and 1986. Mr. Miles discussed with petitioner this latter request. Mr. Miles informed respondent that the trusts were not required to file returns because each of the beneficiaries had filed a return and reported his or her share of the income. 10*241  In 1985-88, petitioner was a shareholder and officer in Frank's Corner, Inc., which operated a bar and lounge (Island Living, Inc.), a furniture import business, and Waltin Investments, Inc. Petitioner was also a shareholder in Medlin Investment Co., Michigan Avenue Car Wash, Majestic Oaks, and Cheyenne Social Club. During the tax years at issue, petitioner owned approximately 25 Ferrari automobiles. Petitioner did not sell any of those Ferraris during 1985-88.On December 17, 1985, petitioner sold a piece of property to Fred Brunson for $ 5,000. The quitclaim deed that petitioner or his agent filed with the Osceola County Recorders Office paid documentary stamp taxes of only $ .50, reflecting a reported sales price of less than $ 100.Petitioner maintained the following bank accounts during the tax years at issue:Bank NameAccount NumberAccount NameFreedom Savings and LoanXX-480-9Walter L. Medlin(Formerly Com Bank)Trust Account 1Tucker State BankXXX9234Walter L. MedlinTucker State BankX8066Walter L. MedlinTrust Account 1The accounts titled "Trust Account 1" were actually petitioner's personal bank accounts. Petitioner*242  was also the beneficiary of a Cayman Islands trust account at Washington International Bank and Trust, Ltd., which he had funded.On a financial statement dated November 15, 1985, petitioner represented that he had a net worth of $ 10,822,260, and he valued his automobile collection at $ 2,717,000. On a financial statement dated June 1, 1988, petitioner represented that he had a net worth of $ 7,121,800. On a financial statement dated September 20, 1989, petitioner represented that he had a net worth of $ 8,837,000. 11Thomas Brooks, a certified public accountant, prepared petitioner's tax returns for the 1977-1982 tax years. Petitioner provided spreadsheets of his income and expenses to Mr. Brooks for the preparation of his tax returns. Mr. Kelly prepared those spreadsheets using as their basis the deposits and disbursements into, and from, petitioner's bank accounts. Petitioner*243  did not inform Mr. Brooks that the proceeds from his real estate transactions were deposited into Mr. Miles's law firm's trust account, that those proceeds were not accounted for on the spreadsheets, that petitioner used trustees in his transactions, or that petitioner had a Cayman Islands trust account. Petitioner did not give to Mr. Brooks any books, records, or closing statements from his real estate transactions. Petitioner did not file timely his Federal income tax returns for 1977, 1978, 1979, 1980, and 1981. Petitioner did not file his Forms 1040 for those years until June 15, 1983.Respondent audited petitioner for the 1977-1982 tax years, and respondent issued a notice of deficiency for those years on June 13, 1986. 12 On September 12, 1986, petitioner filed a petition with the Tax Court (docket No. 36958-86). In January 1988, petitioner and his representative met with respondent's revenue agent for purposes of resolving that case. Petitioner took an active role in those meetings. Most of the real estate transactions which were at issue for the 1977-1982 tax years involved the use of trustees, and petitioner agreed that those particular transactions were taxable. Petitioner*244  did not inform the revenue agent that proceeds from his real estate transactions were deposited into Mr. Miles's law firm's trust account, nor did he inform him of his belief that those proceeds were not subject to taxation if not disbursed. On April 27, 1988, this Court entered a decision pursuant to a stipulation of the parties and found the following deficiencies and additions to tax:Additons to TaxTaxSec.Sec.Sec.Sec.Sec.YearDeficiency651(a)(1)6653(a)6653(a)(1)6653(a)(2)66611977$ 1,082$ 2,240$ 54n/a n/a n/a 197822,21310,6611,161n/a n/a n/a 197963,53315,8833,177n/a n/a n/a 19817,1191,778n/a $ 35650% intereston$ 37,921$ 9,480*245  Petitioner did not file timely his Forms 1040 for 1983 and 1984. Those tax returns were filed on January 30, 1986, and March 7, 1986, respectively. Respondent examined those tax returns. Petitioner told the revenue agent assigned to that examination that he was not involved in any corporations, partnerships, or trusts. Petitioner's income for 1983 and 1984 was determined on the basis of deposits and disbursements from his bank accounts. The revenue agent explained to petitioner that simply analyzing deposits into his bank account was not the proper way to report income and did not reflect the true financial picture of his real estate transactions. Petitioner did not disclose all his installment sale activities to the revenue agent during this examination. Petitioner also informed the revenue agent that his Cayman Islands trust account had been closed in 1983. However, petitioner received five checks totaling $ 135,000 from the Cayman Islands trust in 1985. On October 21, 1988, petitioner agreed to income tax deficiencies of $ 10,550 and penalties of $ 3,584 for those tax years.Respondent received Forms 1040 for petitioner's 1985 and 1986 tax years on November 29, 1988. Those forms*246  were not timely filed. 13 Petitioner's Form 1040 for 1987 was received on October 17, 1988. Petitioner was given an extension until October 16, 1989, to file his 1988 Federal income tax return. Petitioner did not file his Form 1040 for 1988 until April 26, 1990. For each of his Forms 1040 for 1985, 1986, 1987, and 1988, petitioner listed his address as "P. O. Box 383, Lake Lure, NC 28746". However, petitioner actually resided in Kissimmee, Florida, at the time he filed his returns.Respondent examined petitioner's 1985, 1986, 1987, and 1988, tax returns. As part of that examination, respondent's revenue agent spent several weeks researching courthouse records in seven counties in order to identify petitioner's real estate transactions*247  for 1985- 88. Petitioner never informed the revenue agent of his belief that funds from his real estate transactions, which were held in trust, were not subject to taxation. Respondent reconstructed petitioner's income and expenses for 1985, 1986, 1987, and 1988.On September 5, 1990, respondent served a third-party recordkeeper summons on Mr. Miles, which requested information pertaining to petitioner's income tax liabilities for the 1985-88 tax years. At the request of petitioner's representative, Mr. Miles did not provide the requested documents to the IRS. On March 7, 1991, the Government filed a petition in the U.S. District Court for the Middle District of Florida, Orlando Division, to enforce the summons issued to Mr. Miles. On March 26, 1991, petitioner filed a motion to intervene in the enforcement proceeding. On September 17, 1992, the Government filed a notice to dismiss, and, on September 18, 1992, the court canceled a show cause hearing and dismissed the summons enforcement proceeding. On April 18, 1991, respondent served a summons on petitioner. Petitioner failed to comply with the summons, and the Government filed a petition to enforce the summons in the U.S. District*248  Court for the Middle District of Florida, Orlando Division.On June 12, 1997, an information was filed in the U.S. District Court for the Middle District of Florida alleging that petitioner violated section 7206(4) in regard to his unpaid income tax liabilities for 1977-82. On November 13, 1997, pursuant to petitioner's plea of guilty, the District Court entered a judgment convicting petitioner of a violation of section 7206(4) and sentenced petitioner to imprisonment. The offense to which petitioner pleaded guilty occurred on August 9, 1990. In the plea agreement, petitioner admitted:     WALTER L. MEDLIN, in an attempt to avoid the collection of   a previously assessed income tax liability for which levy was   authorized under 26 U.S. C. section 6331, placed three of his   automobiles in a storage facility, located on Michigan Avenue in   Kissimmee, Florida, in the Middle District of Florida, which   facility leased to an entity called Central Florida   Transportation Museum, Inc.     Specifically, the defendant MEDLIN, after consenting to a   United States Tax Court judgment against*249  him in the approximate   amount of $ 400,000.00 for liabilities stemming from tax years   1977-1982, misrepresented the nature and extent of his assets to   an IRS Revenue Officer. Further, after issuance of the levy,   defendant MEDLIN stored the automobiles in the above-referenced   storage facility and, when asked about the case by and [sic] IRS   Revenue Officer, stated that he no longer owned the vehicles.   MEDLIN knew this statement to be false.On November 14, 1997, respondent issued a notice of deficiency to petitioner for 1985, 1986, 1987, and 1988. On February 11, 1998, petitioner filed his petition.Petitioner testified on his own behalf at trial. We find that, generally, his testimony was self-serving, was not credible, was at times inconsistent, and was at other times confusing. Petitioner did not satisfactorily answer many of the questions that he was asked, and the questions that he did answer he did not answer with any degree of specificity. With respect to the real estate transactions, he was evasive and did not recall specific transactions. Petitioner could not testify whether his financial statements were accurate.*250            General Legal PrinciplesRespondent's determinations of unreported income for the tax years at issue are presumed correct, and petitioner bears the burden of proving those determinations incorrect, arbitrary, or erroneous. Rule 142(a);  Welch v. Helvering, 290 U.S. 111">290 U.S. 111, 78 L. Ed. 212">78 L. Ed. 212, 54 S. Ct. 8">54 S. Ct. 8, 2 C.B. 112">1933-2 C.B. 112 (1933);  Parks v. Commissioner, 94 T.C. 654">94 T.C. 654, 658-659 (1990). On the other hand, respondent has the burden of proving by clear and convincing evidence that some portion of an underpayment of taxes by petitioner is due to fraud. Sec. 7454(a); Rule 142(b).Section 6001requires taxpayers to keep adequate records. The regulations promulgated under that section provide:   Records. (a) In general. * * * any person subject to tax   under subtitle A of the Code * * * or any person required to   file a return of information with respect to income, shall keep   such permanent books of account or records, including   inventories, as are sufficient to establish the amount of gross   income, deductions, credits, or other matters required to be   shown by such person in any return of such tax or information. *251     [Sec. 1.6001-1(a), Income Tax Regs.]In  Wichita Terminal Elevator Co. v. Commissioner, 6 T.C. 1158">6 T.C. 1158, 1165 (1946), affd. 162 F.2d 513">162 F.2d 513 (10th Cir. 1947), we stated:   The rule is well established that the failure of a party to   introduce evidence within his possession and which, if true,   would be favorable to him, gives rise to the presumption that if   produced it would be unfavorable. This is especially true where   * * * the party failing to produce the evidence has the burden   of proof or the other party to the proceeding has established a   prima facie case. * * *Also, the failure to present the testimony of available witnesses, who purportedly possess knowledge about certain relevant facts, provides sufficient basis to infer that the testimony of those witnesses would not have been favorable.  Petzoldt v. Commissioner, 92 T.C. 661">92 T.C. 661, 691 (1989);  Pollack v. Commissioner, 47 T.C. 92">47 T.C. 92, 108 (1966), affd. 392 F.2d 409">392 F.2d 409 (5th Cir. 1968).We are not required to accept incredible, implausible, or biased testimony. *252  Fleischer v. Commissioner, 403 F.2d 403">403 F.2d 403, 406 (2d Cir. 1968), affg. T.C. Memo. 1967-85;  Parks v. Commissioner, supra at 659;  Tokarski v. Commissioner, 87 T.C. 74">87 T.C. 74, 77 (1986).I. Items of Income Determined by RespondentRespondent prepared on brief a reconciliation of items which are "in dispute" and concessions as to the adjustments in the statutory notice of deficiency. Appendix C of this opinion reflects the reconciliation schedules that respondent prepared and which petitioner stipulated in his answering brief. We discuss below those items of income that the parties represented were still in dispute. However, we point out that petitioner does not contest on brief many of those items. Instead, he states "In addition, any issues not raised in Petitioner's Brief are also conceded by Petitioner."A. Rents Received From Island Living, Inc. in 1988             FINDINGS OF FACTIn 1985, petitioner through Mr. Miles, as trustee, purchased property located in Osceola County, Florida, the "Osceola County Property" (OS-19). On July 22, 1985, petitioner leased that property to petitioner's corporation, *253 Island Living, Inc., for $ 3,000 per month. Petitioner concedes that he received rents of $ 6,000 in 1985, $ 24,000 in 1986, $ 24,000 in 1987, and $ 12,000 in 1988 from Island Living, Inc.                OPINIONPetitioner did not address on brief whether he received the additional amount of $ 12,000 that respondent determined as rent in 1988. We find that petitioner has conceded this matter. We find that he received $ 24,000 of rental income in 1988 and that he is taxable on that amount. See sec. 61(a)(5).B. Schedule C Gains From Property Sales1. Florida Fruit Belt Subdivision (OS-06)             FINDINGS OF FACTOn April 11, 1985, petitioner through Mr. Miles, as trustee, sold three lots from the "Florida Fruit Belt Subdivision" located in Osceola County, Florida, to Burl and Louise Mynhier for $ 69,000. Mr. and Mrs. Mynhier paid cash of $ 33,000 and issued to petitioner, through Ms. Allen, a promissory note and mortgage for $ 36,000. Petitioner's basis in the three lots was $ 9,316, and he incurred selling costs of $ 412.On May 20, 1985, petitioner through Ms. Allen, as trustee, assigned the mortgage that*254  the Mynhiers issued to his father, Charles Medlin, for $ 36,000. Petitioner instructed the mortgagor to send the mortgage payments directly to Charles Medlin. An assignment of mortgage dated May 20, 1985, and signed by Ms. Allen, was filed with the County of Osceola, Florida; it provides:    That I, Donna L. Allen part[y] of the first part, in   consideration of the sum of Thirty-Six Thousand and no/100   dollars, and other valuable considerations, received from or on   behalf of Charles B. Medlin party of the second part, at or   before the ensealing and delivery of those presents, the receipt   whereof is hereby acknowledged, do hereby grant, bargain, sell,   assign, transfer and set over unto the said part[y] of the   second part a certain mortgage bearing date the 12th day of   April A. D. 1985 made by Burl R. Mynhier and Louise Mynhier, his   wife in favor of Donna L. Allen and recorded in Official Records   Book 772; page 782, public records of Osceola County, Florida,   upon the following described piece or parcel of land, situate   and being in said County and State, to wit:   *255           [Description of OS-06]           *   *   *   *   *   *   *   Together with the note or obligation described in said mortgage,   and the moneys due and to become due thereon, with interest from   the 20th day of May 1985.     To Have and to Hold the same unto the said party of the   second part his heirs, legal representatives, successors and   assigns forever.Petitioner did not report any income from the sale to the Mynhiers on his Form 1040 for 1985.                OPINIONAn installment sale is a disposition of property where at least one payment is to be received after the close of the taxable year in which the disposition occurs. Sec. 453(b). Income from an installment sale shall be taken into account under the installment method. Sec. 453(a). Under the installment method, the income recognized for any taxable year from a disposition is that proportion of the payments received in that year which the gross profit bears to the total contract price. Sec. 453(c). Respondent determined that petitioner recognized $ 28,347 as income from*256  the installment sale to the Mynhiers in 1985. 14 Petitioner did not address this issue on brief, and he conceded any arguments he might have made, but did not. We hold that petitioner recognized $ 28,347 as income from the installment sale in 1985.Under section 453B(a), gain or loss shall be recognized on the sale or exchange of an installment obligation to the extent of the difference between the basis of the obligation and the amount realized. The basis of an installment obligation shall be the excess of the face value of the obligation over an amount equal to the income which would be returnable were the obligation satisfied in full. Sec. 453B(b)*257  . Any gain or loss recognized shall be considered as resulting from the sale or exchange of the property in respect of which the installment obligation was received. Sec. 453B(a) (flush language).Respondent determined that the assignment by petitioner to Charles Medlin was a sale of an installment obligation under section 453B(a) and that petitioner recognized a gain of $ 30,925 in 1985. 15 Petitioner argues that the assignment of the mortgage to his father was not a sale but that it was pledged as collateral for a loan.At trial, petitioner testified as follows:   Q All right. Would you explain what transpired in relation to   this mortgage and how you dealt with the mortgage in relation to   your father?   A From the sale of the property, there*258  was down payment for   cash. And then the mortgage, we took out the mortgage. And the   guy would make payments; I believe they were annual payments, or   maybe monthly; I'm not sure. Anyway, he was going to make   payments, but I needed some money.     And my father, again, he was mainly a go-put-his-money-in-   the-bank; he wasn't interested in real estate deals or anything,   and I was probably sitting around moaning to him about the   interest I was paying to other people like Mr. Margolis and   things like that; he expressed an interest in -- why didn't I   give him some of that? And I was reluctant. He lived in   Jacksonville and didn't know anything about my business or   anything else, so -- but, anyway, this was something he could   relate to. It was a mortgage on a piece of property and there   were payments coming in and I went to him and borrowed -- I'd   borrowed from him before, just smaller amounts of money -- some   money from him against the mortgage, and signed a note to him as   collateral, and proceeded to continue to collect the payments.   Again, *259  trying to make him feel warm and fuzzy, instructed the   mortgagor to send the mortgage payments directly to my dad. We   stayed on top of it and if they were a day late, he called, and   we had to go round up the guy and get it to him.     Basically, it was a loan from my dad and as I got in my   payments from the other guy, they were forwarded either directly   to him or I got the payments in and forwarded them directly to   my dad. Unlike where you sell a mortgage without recourse and   it's gone, it's the other person's mortgage and you get the   money and go home, I had to live with this. And, if he had quit   paying, my father didn't want a piece of property in Osceola   County, at his age, his health, you know, I was going to have to   pay the mortgage.   Q You were going --   A Right. I was going to have to pay the loan in lieu of the   mortgage payments?   Q So your position in relation to the handling of that mortgage   is that you did not sell the mortgage to your father?   A Correct. As collateral, though, it was assigned to him. And *260    that's customary practice. I've borrowed against mortgages,   mortgage payments, from like Finance America, Chrysler Financial   Corporation, and stuff and generally what you do is assign them   a mortgage, usually you assign them the mortgage and a portion   of the note. Say you only borrowed the next five payments, say,   you would assign them a portion of the note.Petitioner's testimony is self-serving, is less than credible, and it is not supported by the testimony of other witnesses or evidence of record. Indeed, on brief, petitioner states that "Mr. Medlin's testimony clouded by the passage of so many years was not precise." We cannot accept petitioner's unsubstantiated testimony. 16If we were to accept*261  petitioner's unsubstantiated testimony at face value that an installment obligation was pledged as collateral for loan proceeds, section 453B would be largely ineffective. Where as here, no documentary proof has been introduced to show that petitioner remained personally liable for any failure of the mortgagor's payment, we cannot accept that the assignment was a pledge of collateral.Certainly, the form of the assignment was a sale. The assignment of mortgage filed with Osceola County states that Ms. Allen assigned the mortgage to Charles Medlin "in consideration of the sum of" $ 36,000. Moreover, petitioner's instructions to the mortgagor were that direct payments were to be made to his father following the assignment. Further, although petitioner testified to his continued involvement in the collection of the mortgage, he could not testify definitively as to whether he or Charles Medlin received the mortgage payments. Nevertheless, petitioner claims that the assignment of the mortgage occurred without an assignment of the promissory note and that this indicates the mortgage was assigned to Charles Medlin as collateral for a loan. 17 However, the assignment of the mortgage states*262  that the mortgage "Together with the note or obligation described in said mortgage, and the moneys due and to become due thereon" were transferred. We hold that petitioner recognized gain of $ 30,925 from the sale of an installment obligation in 1985.2. Susan's Lakefront Estate (OS-03)             FINDINGS OF FACTIn 1970, Medlin Investment Co. purchased certain real property in Osceola County, Florida, for $ 59,005. This property was subdivided as "Susan's Lakefront Estate" and consisted of 30 lots (Lot 1, Lot 2, * * *, Lot 30) and one tract (Tract A).On July 2, 1985, petitioner through Ms. Allen, as trustee, sold Lot 1 for $ 22,000. Petitioner did not report any income*263  from this sale on his 1985 Form 1040. On June 12, 1986, petitioner through Ms. Allen, as trustee, sold Tract A, for $ 23,000. Petitioner did not report any income from this sale on his 1986 Form 1040. On May 25, 1988, petitioner through Mr. Miles, as trustee, sold Lots 6 through 30, for $ 540,000. 18 The purchasers paid $ 89,077 in 1988 and issued a purchase money mortgage for the remainder. We are unable to locate this payment on petitioner's spreadsheets for 1988, and it does not appear that he reported any amount of this payment as income on his return for 1988.                OPINIONIn computing petitioner's gains from the sales in 1985, 1986, and 1988, respondent apportioned the cost basis of the entire property equally among Lots 1 through 30 and Tract A, and assigned a basis of $ 1,903 to each lot and tract. 19 Respondent determined that petitioner realized a gain of $ 20,097 from the sale in 1985, *264 20 a gain of $ 21,097 from the sale to Mr. Dugger in 1986, 21 and installment gains of $ 77,298 from the sales in 1988. 22*265  On brief, petitioner does not address the disputed gains from the sales of the lots and the tract. We find that petitioner received the amounts determined by respondent as income for the years in issue and they are taxable as gains derived from dealings in property. See sec. 61(a)(3).3. High Plains Property (OS-35)             FINDINGS OF FACTOn June 29, 1977, petitioner, as trustee, through Mr. Miles, as trustee, purchased real property in Osceola County, Florida, which we refer to as the "High Plains Property" (OS- 35), from William F. Mitchell, for $ 448,000. The High Plains Property was a large piece of property (a couple hundred acres) which was divided into 5-acre tracts.On May 30, 1985, petitioner through Ms. Allen, as trustee, sold a lot (Lot 23) in the High Plains Property to Clarence L. Bass for $ 27,000. A gain of $ 19,699 was realized from the sale of this lot in 1985. Petitioner did not report any income from the sale on his Form 1040 for any tax year.Wayne Schoolfield and petitioner each originally owned a 50-percent interest in the High Plains Property. Indeed, a declaration of trust dated April 11, 1977, provides:  *266     MADE this 11th day of April 1977 by and between D. L.   Allen, hereinafter referred to as Allen and C. Wayne Schoolfield   and W. L. Medlin, Trustee as Beneficiaries.     NOW, THEREFORE, Allen, in consideration of $ 1.00 and other   valuable considerations, hereby declares that she as Trustee   holds in trust (for the beneficiaries herein named) that certain   Offer to Purchase Contract on property in Osceola County,   Florida, presently owned by William F. Mitchell, Trustee.     WHEREAS, the beneficiaries of this Trust and their interest   are as follows: C. Wayne Schoolfield -50% and W. L. Medlin,   Trustee -50%.     WHEREAS, Allen further declares she as Trustee will own,   possess and administer the same only in keeping with the   interest of the beneficiaries thereto and they shall have sole   discretion and authority to sell, assign, transfer, and convey   or otherwise dispose of the aforesaid Offer to Purchase Contract   and that she will execute any and all necessary forms to   consummate a sale upon receiving notice from the beneficiares*267     [sic]. Allen shall account to and pay over to the beneficiarie   [sic] herein the proceeds derived from their stated interest in   that Receipt for Deposit and Offer to Purchase contract dated   April 7, 1977 and attached hereto.     AND WHEREAS: Allen shall not sell, convey or exchange the   property conveyed to her as Trustee with herself as an   individual without written consent of the beneficiaries of this   Trust Agreement and she shall keep an accurate set of records   regarding the above property and render periodic accounting   therefore to the beneficiaries.Mr. Schoolfield and petitioner's joint ownership of the High Plains Property terminated at some point in time.                OPINIONRespondent determined that petitioner was the sole owner of Lot 23 and that he realized the entire $ 19,699 gain from the sale of Lot 23 in 1985. Petitioner contends that he was a half-owner of the lot with Mr. Schoolfield when the property was sold and that he received only half of the gain that respondent determined.At trial, petitioner testified that he was in a partnership*268  with Mr. Schoolfield with respect to the High Plains Property; however, he could not testify definitively that he and Mr. Schoolfield were still 50-50 owners at the time of the sale:   Q What was your ownership interest in * * * [the High Plains   Lot]?   A I was in a partnership. This is one of the pieces I mentioned   earlier that Wayne Schoolfield and I had purchased from Mr.   Green and Mr. Mitchell and developed it, broke it up into these   5-acre tracts, and sold them.   Q What percentage interest did you have when OS-35 was sold?   A I'm sorry. I don't -- Wayne and I, when we did this   development, were 50-50 and, I believe, that at this time, we   were still 50-50 owners in the property.           *   *   *   *   *   *   *   Q Did that partnership ultimately end?   A Yes, sir.   Q Do you recall whether it ended before or after the sale of the   lots in OS-35?   A I think we ultimately sold all the property out, and, then,   basically, took our money and went home.Mr. Schoolfield testified that he was involved*269  in a joint venture with petitioner with respect to the High Plains Property. However, when Mr. Schoolfield was shown a copy of the warranty deed from Ms. Allen to Mr. Bass, he could not recall having ever owned any interest in Lot 23, and he did not recall having ever received any sale proceeds from Ms. Allen for this property. 23 Mr. Schoolfield further testified that the joint ownership of the High Plains Property may have terminated sometime prior to the sale of Lot 23 to Mr. Bass, perhaps as early as the 1970s:*270    Q Did you ever have any ownership interest in property known as   High Plains?   A I had some -- I ended up with some 5-acre tracts out of that.   Started off to joint venture, but ended up with some 5-acre   tracts out of it, yes.   Q You say it was a joint venture with who?   A Mr. Medlin.   Q With Mr. Medlin?   And when did that joint venture break up?   A I'm not sure I can give you a date there, it's so long. It's   in -- back in the 70's.   Q It broke up sometime in the 70's?   A I think it occurred probably then, but you got to remember,   this stuff is going back so far. My hair was black and I didn't   have a bald spot in the back of my head.     You know, it's a long time. But I think it was in the early   stages, but I can't, you know, I -- my memory is not that good.   Q Did it occur before the date of this warranty deed, which is   May of 1985?   A I certainly thought it would have.Ms. Allen testified that petitioner and Mr. Schoolfield were partners with respect to the High Plains Property and*271  that they had split up at some point in time. She could not testify as to when specifically they split up.The evidence of record shows that at one point, Mr. Schoolfield and petitioner held joint interests in the High Plains Property, which may or may not have included Lot 23. Neither petitioner's, Mr. Schoolfield's, nor Ms. Allen's testimony establishes that Mr. Schoolfield still possessed his joint interest at the time of the sale of Lot 23 in 1985, or, for that matter, whether he ever possessed any interest in Lot 23. The testimony suggests that it was just as likely, if not more probable, that Mr. Schoolfield and petitioner split up the various tracts amongst themselves before 1985, that petitioner was left as the sole owner of Lot 23, and that petitioner proceeded to sell that lot in 1985 and collect the sales proceeds therefrom. 24*272  Petitioner relies on Mr. Schoolfield's testimony that he could not say for certain that he did not have a 50-percent interest in Lot 23 at the time of its sale to Mr. Bass and that he could not say for certain when the "ultimate division" of the respective interests in the High Plains Property had occurred. We reemphasize that respondent's determination of a deficiency is presumed correct, and it is petitioner who bears the burden of proving that determination incorrect. Since petitioner bears the burden of proof, he must also bear the onus of failed recollection and the lack of documentary evidence. Further, petitioner has created the situation in which he now finds himself by failing to document properly his various real estate transactions, in failing to maintain and keep adequate records, and by unnecessarily complicating those transactions. We hold that petitioner is responsible for 100 percent of the gain realized on the sale of Lot 23 in 1985.4. Silver Lake (OS-01.4)             FINDINGS OF FACTOn September 30, 1975, petitioner, as trustee, purchased property in Osceola County, Florida, which we refer to as "Silver Lake" (OS-01.4). In November*273  1978, petitioner, as trustee, sold Silver Lake to L. R. Donnell, Jr., as trustee, for $ 70,000. On February 5, 1979, Mr. Donnell, as trustee, conveyed Silver Lake to Mr. Miles, as trustee, for no consideration.On October 31, 1980, Mr. Miles, as trustee, sold Silver Lake to Don Prewitt, as trustee, for $ 220,600. Mr. Prewitt issued a purchase money mortgage for $ 180,000 to Mr. Miles and paid the balance. Mr. Miles, as trustee, received the following principal and interest payments in 1985, 1986, and 1987:YearPrincipalInterest1985$ 18,000$ 13,545198636,000 11,610 198772,000 10,976 Petitioner owned a 50-percent interest in Silver Lake at the time of its sale in 1980, and his basis was $ 70,000.                OPINIONRespondent argues that petitioner realized installment gains of $ 6,144, $ 12,288, and $ 24,577 in 1985, 1986, and 1987, respectively, for the principal amounts paid to Mr. Miles. 25 Petitioner, on brief, does not address the matter. We find that petitioner realized installment gains of $ 6,144, $ 12,288, and $ 24,577 in 1985, 1986, and 1987, respectively. Sec. 453(a)*274  .Respondent originally determined that petitioner realized interest income for the full amount of the interest payments made to Mr. Miles. Respondent now concedes that petitioner realized only 50 percent of the original amounts determined. Petitioner does not address on brief his liability for half of the interest income. We hold that petitioner realized interest income of $ 6,773, $ 5,805, and $ 5,488 in 1985, 1986, and 1987, respectively.5. East Lake Vista (OS-47)             FINDINGS OF FACTOn May 1, 1984, Mr. Miles, as trustee, purchased*275  real property consisting of approximately 156.65 acres in Osceola County, Florida, which we refer to as "East Lake Vista" (OS-47), from Reba Smith, for $ 500,000. Part of the purchase price, $ 125,000, was paid in cash, and Mr. Miles issued a purchase money mortgage of $ 375,000 for the remainder. 26In May 1986, Mr. Miles sold approximately 31 acres of East Lake Vista to Nicholas Pope, for $ 205,000. On December 16, 1986, Mr. Miles sold an additional 31.50 acres of East Lake Vista to Mr. Pope for $ 215,181. Petitioner did not report any income from those transactions on a Form 1040 for any tax year.On December 16, 1986, at the same time as*276  the second sale, petitioner and Dr. George Gant entered into a "Continuing and Unconditional Guaranty of Performance and Payment" in favor of Mr. Pope. That document shows petitioner and Dr. Gant as "Guarantors", Mr. Miles, trustee, as "Seller", and Mr. Pope as "Buyer":     WHEREAS, R. Stephen Miles, Jr., Trustee, as Seller, and   Nicholas A. Pope, as Trustee under that certain unrecorded Trust   Agreement dated December 16, 1986, and/or Assigns, as Buyer,   entered into that certain Contract and Sale and Purchase dated   May 2, 1986 (the "Contract") with respect to the   purchase of approximately 31.50 acres, more or less, located in   Osceola County, Florida (the "Property"); and     WHEREAS, the terms of the Contract provide for Seller's   obligation to complete construction of a road to be known as   "Dan Smith Road" adjacent to the Property at Seller's   expense within one (1) year after the date of closing, and   further provide for Buyer's right to complete said construction   and be reimbursed by Seller in the event of Seller's failure to   complete said construction in accordance*277  with the Contract; and     WHEREAS, the Contract further calls for the personal   guaranty of Seller's performance of said road construction and   payment for said road construction by the undersigned;     NOW THEREFORE, as an inducement to the Buyer to purchase   the Property, and for good and valuable consideration not herein   recited but the receipt and sufficiency of which is hereby   acknowledged, the undersigned, jointly and severally, give to   Buyer, and its successors and assigns, their continuing and   unconditional guaranty of performance and payment by the Seller   of the following described obligation, to the same extent as if   Guarantors were the named parties identified as the Seller under   the Contract:           *   *   *   *   *   *   *     The Guarantors hereunder also agree to pay all costs   (including attorneys' fees whether incurred in connection with   collection, trail [sic], appeal or otherwise) of collection   against the Guarantors under this Guaranty. The liability of   Guarantors hereunder*278  is binding upon Guarantors and Guarantors'   successors and assigns.Petitioner and Dr. Gant signed the guaranty.In August 1988, Mr. Miles, as trustee, sold approximately 10 acres of East Lake Vista for $ 80,000. Petitioner, for Mr. Miles, signed the sales contract. Petitioner did not report any income from this sale on his Form 1040 for 1988.The record contains two personal financial statements for petitioner. The first is dated November 15, 1985, and lists as an asset, East Lake Vista; 27 a "160 acre parcel located on East Lake North of Narcoossee being subdivied [sic] into 5 ac. tracts and is encumbered by 2 mortgages totaling $ 386,000.00". The listing states: "I own Mr. Miles's law firm maintained certain ledger cards, numbers 70006 through 70008, which are entitled "Walter Medlin/Reba*279  Smith", "Medlin Re: Smith, Reba", and "Medlin, Walter from Reba L. Smith", respectively. Those ledger cards contain the following relevant entries:LedgerCard                            Trust FundsNumber/                        ______________________Line     Date      Name         Memo    Received   Disbursed_______   ______     ____         ____    ________   __________7000For each of the various sales transactions in 1986 and 1988, the parties executed a closing statement. The amounts listed in those statements as deposits in escrow and as amounts due from the buyer to the seller match amounts listed as deposits in the ledger cards above, ledger card No. 70008 (lines 16 and 21), No. 70007 (line 15), and No. 70006 (lines 6-8).Dr. Gant and petitioner each owned a 50-percent interest in the "Mefford Property" (OS-22), which was sold on October 7, 1988, for $ 250,000. A gain of $ 110,328 was realized from this sale. Respondent originally determined that petitioner was responsible for the entire gain realized from*280  this sale, but he now concedes that petitioner is responsible for only half of that amount ($ 55,164).Dr. Gant and petitioner also each owned a 50-percent interest in a piece of property which we refer to as the "Tai Property". The Tai Property was sold in 1984 for $ 457,900, and petitioner concedes that he is liable for 50 percent of the installment gain ($ 50,863) from payments received in 1985. See appendix C.                OPINIONIt is well established that income must be taxed to him who earns it,  United States v. Basye, 410 U.S. 441">410 U.S. 441, 449, 35 L. Ed. 2d 412">35 L. Ed. 2d 412, 93 S. Ct. 1080">93 S. Ct. 1080 (1973), and that income includes gains derived from dealings in property. Sec. 61(a)(3). Respondent determined that petitioner owned a 50-percent interest in the portions of East Lake Vista sold in 1986 and 1988 and that he was responsible for 50 percent of the gain realized from those transactions. 28 Petitioner contends that Dr. Gant owned 100 percent of East Lake Vista at the time of the sales in 1986 and 1988. Petitioner argues that he and Dr. Gant originally agreed to be 50-50 partners with respect to East Lake Vista, but that Dr. Gant contributed the*281  entire purchase price and thus acquired a 100-percent ownership interest in the property.*282  At trial, petitioner testified that, initially, he was to receive a 50-percent interest in East Lake Vista, but because Dr. Gant "put up all the money and wanted all the interest in the property", Dr. Gant "essentially owned all of it". However, petitioner's testimony was not definitive and was indeed speculative. It was also self-serving, and we do not agree that he owned no interest in East Lake Vista at the time of the 1986 and 1988 sales. The documentary evidence of record shows that petitioner held an ownership interest in East Lake Vista at the time of the sales in 1986 and 1988.First, petitioner's financial statements dated November 15, 1985, and June 1, 1988, show that he owned at least a 50-percent interest in East Lake Vista at some point before the sales that occurred in 1986 and 1988. Petitioner contends that the November 15, 1985, financial statement is not inconsistent with his testimony and Dr. Gant's testimony that he was to originally own a 50-percent interest in East Lake Vista, which subsequently changed to no interest. Petitioner has not presented any evidence to establish when his and Dr. Gant's original understanding supposedly changed; however, if it did change, *283  we assume the change would have occurred either before or shortly after May 1, 1984, when Dr. Gant purportedly "put up all the money", the $ 125,000 cash portion of the purchase price. 29 The financial statement is dated November 15, 1985, a full year and a half after the purchase of East Lake Vista. Petitioner offers no explanation why he continued to represent himself as owning a 50-percent interest in November 1985, if, in fact, he owned no interest after Dr. Gant put up all the cash in May 1984.Petitioner also contends that the June 1, 1988, financial statement cannot be relied upon since it incorrectly shows that he owned 100 percent of East Lake Vista and that the property consisted of 100 acres when, in fact, it consisted of 84 acres. We do not agree that these purported inaccuracies cause the June 1, 1988, financial statement to lose its persuasive value. *284  The financial statement was prepared by or for petitioner, and petitioner does not explain why those inaccuracies were reflected on his financial statement, and why they invariably suggest that he held no interest in East Lake Vista in 1988. At the very least, the June 1, 1988, financial statement shows that petitioner perceived himself to own at least some interest in East Lake Vista in 1988 and that he intended other persons who might rely on the financial statement to recognize that ownership.The road construction guaranty also indicates that petitioner had an ownership interest in East Lake Vista. Petitioner, Mr. Miles, and Dr. Gant executed the guaranty on December 16, 1986, the same date as the sale of the 31.50 acres of East Lake Vista to Mr. Pope. And, it specifically refers to a contract for the sale of 31.50 acres that Mr. Miles and Mr. Pope entered into on May 2, 1986. Petitioner argues that this guaranty originated in petitioner's "working relationship" with Dr. Gant and did not arise from any ownership interest in the property. However, petitioner did not present any evidence or testimony to suggest that he was compensated for his real estate services. Also, we cannot*285  accept that he was performing those services for free. Petitioner does not suggest that amounts he received following the sales in 1986 and 1988 were, in fact, compensation, and, indeed, petitioner claims those amounts were loans. It is more plausible that petitioner's performance of services and his guarantee for the road construction arose from his ownership interest in East Lake Vista.Under petitioner's argument, we must assume that any services that petitioner performed were for the benefit of Dr. Gant, the purported 100-percent owner of East Lake Vista. But, Dr. Gant did not testify that petitioner performed services for his benefit and that he compensated petitioner. Dr. Gant's testimony, as a whole, indicates that petitioner performed the real estate services for a 50-percent interest in East Lake Vista. Dr. Gant testified that he and petitioner started out 50-50, with Dr. Gant putting up all the money 30 and petitioner doing all the work. However, according to an "agreement" with Mr. Miles, ownership of the property was "posted as 100 percent on my part since I put up the money". Dr. Gant also testified:*286    Q Did you pay anything for the additional 50 percent interest   from Mr. Medlin?   A As I tried to explain to you earlier, the 50 percent was a   5   Q I must not have, sir. I apologize.   A He did not put any money up. He didn't put a dime up to the   best of my knowledge. I put the money up.   Q But now, he purchased the property. Correct?   A No.   Q In terms of the expertise -- he selected the property? Excuse   me.   A He selected the property.   Q He selected the property?   A I paid for the property.   Q Okay. And so he just gifted his interest to you? I mean, I   understood the deal was 5   A He didn't have any interest. His interest was in the   developing part of it.           *   *   *   *   *   *   *   Q * * * On the Narcoossee property, if Mr. Medlin had a   financial statement that showed that he was a 50 percent   interest or owned half of the Narcoossee property, would you say   that that was correct.   A Sure. That was our understanding*287  -- I tried to explain that --   when we first started.     But to protect my interest it was necessary for me to   assume the 100 percent, as I had put the money in, 100 percent   of the property.   Q I understand, sir.   A And all of the money he has taken out of it, the original   investment has never been paid back. I know you haven't asked   this question, but it's important for you to know.Dr. Gant's testimony, as a whole, shows considerable confusion regarding petitioner's interest in East Lake Vista. However, his testimony indicates that he assumed 100-percent legal ownership of East Lake Vista to protect his initial $ 125,000 contribution; however, petitioner continued to possess an interest in the property because of his contribution of services. Dr. Gant did not testify that the supposed agreement with Mr. Miles deprived petitioner of a participation in any profits realized from the property.Petitioner's execution of the sales contract for the August 1988 sale also indicates that he had more than just a working relationship with Dr. Gant with respect to East Lake Vista. It shows that he had the legal capacity*288  to sell the property. This denotes ownership. In addition, the ledger cards maintained by Mr. Miles's law firm are essentially a record of the transactions associated with East Lake Vista. Those ledger cards show the initial disbursement of approximately $ 125,000 to Reba Smith, the annual payments on the mortgage issued to Ms. Smith, and the amounts received from the sales in 1986 and 1988. The ledger cards each list petitioner's name with respect to transactions which occurred from 1984 to 1989. The ledger cards contradict a significant portion of Dr. Gant's testimony and are certainly inconsistent with petitioner's contention that he owned no interest in East Lake Vista. Although Dr. Gant testified that he did not put up any additional cash after his initial $ 125,000, the ledger cards show that $ 62,867.16 was received from "George Gant" on May 2, 1984. Further, Dr. Gant testified that he was the only cash person in the deal; however, the ledger cards show that $ 62,873.61 was received on May 2, 1984, from the Medlin/Gant ledger card. 31 Also, the ledger cards show that matching deposits of $ 61,646.52 were received on May 14, 1985, from the Medlin/Tai card. Since petitioner and*289  Dr. Gant each owned a 50-percent interest in the Tai Property, we assume that petitioner contributed at least $ 61,646.52 with respect to East Lake Vista.The ledger cards also show disbursements to petitioner's general ledger card. Moreover, the pattern of duplicate disbursements shortly after the 1986 and 1988 sales to ledger cards in which petitioner and Dr. Gant presumably held equal interests certainly supports respondent's position that petitioner and Dr. Gant each owned a 50-percent interest in East Lake Vista. Petitioner, on the other hand, argues that his and Dr. Gant's testimony shows that any amounts he received from the 1986 and 1988 sales were received as loans from Dr. Gant. We disagree.Dr. Gant testified that he did not have any records showing loans to petitioner, that he did not receive a note from petitioner, and that all records were maintained by Mr. Miles. Petitioner*290  did not submit any records to substantiate his and Dr. Gant's testimony that loans were made, and none of the records from Mr. Miles's law firm, including the ledger cards, show any loans or their amounts.At trial, petitioner and Dr. Gant testified that proceeds from the sales of East Lake Vista were deposited into Mr. Miles's law firm's trust account and that petitioner would then "borrow" those proceeds for his own purposes. However, it is not at all clear from Dr. Gant's testimony what he considers to be a "loan". 32 It appears to us that Dr. Gant understood that upon the receipt of any sale proceeds from East Lake Vista, and after debt service on the note to Reba Smith, that he was to be repaid his initial $ 125,000, but that petitioner instead borrowed those proceeds, and that Dr. Gant has never been paid back his $ 125,000. However, those facts do not establish a loan, and, in any event, they are not inconsistent with petitioner owning a 50-percent interest in East Lake Vista. There is no evidence in this case that petitioner had an obligation to repay the amounts " borrowed", and there is no evidence that those amounts were treated as a bona fide obligation or that Dr. Gant*291  attempted to collect the amounts supposedly borrowed. At best, Dr. Gant's testimony indicates that petitioner made draws from Mr. Miles's trust account on the sale proceeds received from East Lake Vista and that those draws caused Dr. Gant to fail to realize the full extent of what he initially invested. However, those facts do not establish a loan or otherwise permit petitioner to escape taxation on his share of the gains from East Lake Vista.Petitioner also points to respondent's concession that petitioner owned only a 50-percent interest in the Mefford Property, and he argues that this concession supports the credibility of petitioner's and Dr. Gant's testimony with respect to East Lake Vista. *292  We disagree. The record contains numerous concessions by both petitioner and respondent, and we are not inclined to speculate as to the basis for those concessions. In any event, respondent notes that he conceded one-half of the deficiency with respect to the Mefford Property, because there was contemporaneous documentary evidence to support Dr. Gant's testimony. Respondent contends, and we agree, that Dr. Gant's testimony lacks such support with respect to East Lake Vista. Further, respondent's position after concession with respect to the Mefford Property would now appear consistent with the position he has taken with respect to East Lake Vista, that petitioner and Dr. Gant each owned a 50-percent interest. It is also consistent with their respective interests in another piece of property, the Tai Property.We hold that petitioner owned a 50-percent interest in East Lake Vista, and we sustain respondent's determination that petitioner realized 50 percent of the gains from the sales in 1986 and 1988.6. Grissom Parcels (OS 1.3)             FINDINGS OF FACTOn April 15, 1985, petitioner purchased three parcels (parcels 1, 2, 3) of real property in*293 Osceola County, Florida, which we refer to as the "Grissom Parcels", for $ 47,000. Parcel 1 is fronted by U.S. Highway 192, and it borders another road, Rivers Road, on one side. Parcels 2 and 3 do not border U.S. Highway 192, are separated from parcel 1 by Rivers Road and several smaller tracts of property, and border a road referred to as "County Road". The relative sizes of the parcels are similar, although the dimensions differ.On November 5, 1985, petitioner transferred the parcels to Ms. Allen, as trustee, for no consideration. Petitioner was the sole beneficiary of the parcels conveyed to Ms. Allen. On October 22, 1986, petitioner, through Ms. Allen, sold parcel 1 for $ 40,000.For 1987, Osceola County assessed the values of the Grissom Parcels as follows:   Parcel Number           Assessed Value   Parcel 1               $ 12,500   Parcel 2                14,955   Parcel 3                11,228   Total Assessed Value          38,683                OPINIONThe parties agree that $ 40,000 was*294  realized on the sale of parcel 1 in 1986, and that petitioner is responsible for any gain from that sale. The issue that remains for decision is petitioner's basis in parcel 1. The adjusted basis for determining gain from the sale of property, whenever acquired, shall be the basis determined under section 1012 and adjusted as provided in section 1016. Sec. 1011(a). Under section 1012, the basis of property shall be the cost of such property. Under section 1016(a)(1), the basis of property shall be adjusted for expenditures, receipts, losses, or other items, properly chargeable to capital account.When a part of a larger property is sold, the cost or other basis of the entire property shall be equitably apportioned among the several parts, and the gain realized or loss sustained on the part of the entire property sold is the difference between the selling price and the cost or other basis allocated to that part.  Fasken v. Commissioner, 71 T.C. 650">71 T.C. 650, 655 (1979); sec. 1.61-6(a), Income Tax Regs. An equitable apportionment of cost basis may reflect the relative fair market values of the portions of the larger property at the time of their purchase. Sec. 1.61-6(a),Example(2), Income Tax Regs.*295  Our determination of the allocation of basis is a question of fact.  Sleiman v. Commissioner, 187 F.3d 1352">187 F.3d 1352, 1360 (11th Cir. 1999), affg. T.C. Memo 1997-530">T.C. Memo. 1997-530.Respondent relies upon the assessed values of the Grissom Parcels in 1987 to determine the relative values of those parcels when they were purchased in 1985. Respondent allocated the purchase price of $ 47,000 in 1985 to the parcels as follows:                 Percentage   Parcel    Assessed      of Total        Basis   Number    Value     Assessed Value     Allocated 1________ ________ ______________ _________ Parcel 1 $ 12,500 32% $ 15,040 Parcel 2 14,955 39 18,330 Parcel 3 11,228 29 13,630 Totals 38,683 100 47,000After accounting for selling expenses of $ 4,458, respondent determined that*296  petitioner realized a gain of $ 20,502. 33  Petitioner contends that the methodology used by respondent to allocate cost basis to the Grissom Parcels is arbitrary. Petitioner argues that the cost basis should have been allocated according to the relative fair market values of the parcels in 1985 and that several factors show that parcel 1 was the most valuable of the three parcels when they were purchased.Generally, "We do not consider that the amount for which the property was assessed for purposes of local taxation is necessarily a reliable criterion to be used in estimating its fair market value." 34 Frazee v. Commissioner, 98 T.C. 554">98 T.C. 554, 563 (1992). However, in appropriate circumstances tax-assessed values can be useful as a guideline or as corroboration of other evidence of fair market value. *297  Kellahan v. Commissioner, T.C. Memo. 1999-210. And, in the case that we are concerned with the relative values of several parts of a larger piece of property, local tax assessments may be relied upon to provide the correct value of a particular parcel of real estate. 2554- 58 Creston Corp. v. Commissioner, 40 T.C. 932">40 T.C. 932, 940 n. 5 (1963). 35 We are not willing to conclude as a matter of law that because respondent's determination is based on local tax assessments, it is arbitrary. And, indeed, respondent's determination appears reasonable and consistent with the relative sizes of the three parcels. See  Clayton v. Commissioner, T.C. Memo. 1956-21, affd. 245 F.2d 238">245 F.2d 238 (6th Cir. 1957).*298 "When, as in this case, the Commissioner has determined an allocation of basis, a taxpayer bringing a deficiency proceeding bears the burden of proving by a preponderance of the evidence that the Commissioner's determination is erroneous."  Sleiman v. Commissioner, supra at 1359; see also  Byram v. Commissioner, 555 F.2d 1234">555 F.2d 1234, 1236 (5th Cir. 1977), affg. T.C. Memo 1975-135">T.C. Memo. 1975-135. Petitioner argues that parcel 1 is fronted by U.S. Highway 192, the main road through Osceola County to Walt Disney World, whereas parcels 2 and 3 are on a dirt road, and that parcel 1 was zoned commercial, whereas parcels 2 and*299  3 were zoned residential. He also testified that parcels 2 and 3, at the time of their purchase, were "in a real undesirable neighborhood. As you get down here, a lot of drug users and stuff. There's sort of a shack here." Petitioner claims, on the sole basis of his testimony, that one-half of the original $ 47,000 purchase price, $ 23,500, 36 should be allocated to the parcel sold in 1986 and that he is responsible for $ 12,042 of gain. 37*300  Petitioner is not a disinterested witness. Further, his opinion regarding the value of the Grissom Parcels is based on his own subjective viewpoint about the desirability of those individual parcels. Petitioner presents no objective analysis to support his valuation of parcel 1 to be "at least half of the entire purchase". Petitioner presented no records that were prepared at the time of the purchase or sale that reflected the allocation in his testimony, and he completely failed to report the sale on his income tax return. We cannot accept petitioner's testimony to establish the relative values of the Grissom Parcels, and he has failed to overcome the presumption of correctness that attaches to respondent's determination. We hold that petitioner's basis in parcel 1 was $ 15,040 and that his gain from its sale in 1986 was $ 20,502.     7. Arrowhead Lakes Subdivision (OR-2), Angel-Royse     Property (OS-39)             FINDINGS OF FACTIn 1974, Roger McLaughlin, as trustee, purchased Lots 26, 27, and 28 in the Arrowhead Lakes Subdivision (OR-2), which was located in Orange County, Florida. In 1977, Mr. McLaughlin conveyed*301  those lots to Ms. Allen, as trustee, for no consideration. In 1979, Ms. Allen conveyed those same lots to Mr. Miles, as trustee, for no consideration. Petitioner owned Lots 26, 27, and 28 in the Arrowhead Lakes Subdivision; petitioner was the 100-percent beneficiary of the lots held in trust by Mr. Miles.In 1983, Mr. Miles, as trustee, purchased 40 acres of a certain real property in Osceola County, Florida. On January 31, 1983, Mr. Miles, as trustee, issued a mortgage deed (purchase money note and first mortgage) of $ 70,200 with respect to this purchase. On February 24, 1983, Mr. Miles, as trustee, issued to Mr. McLaughlin a mortgage deed (purchase money note and second mortgage) of $ 30,500, which related to the 40-acre purchase. On March 25, 1983, petitioner entered into a contract to purchase an additional 34 acres for $ 102,000. Mr. Miles, as trustee, issued a mortgage deed of $ 73,000 for part of the purchase price. The 34 acres were conveyed to Mr. Miles, as trustee, on October 26, 1983. Petitioner and Mr. McLaughlin were equal beneficiaries in the 74 acres held in trust; we refer to the property held in trust as the "Angel-Royse Property" (OS- 39).Petitioner's financial*302  statement dated November 15, 1985, lists as an asset, "Angel-Royce Development"; 38 a "74 Acre parcel located on North side of Boggy Creek Road west of the Turnpike and valued at $ 8,000 per acre. There are several mortgages covering the various parcels totaling $ 212,000 payable over 15 years I own 50%". The statement values petitioner's interest in the property at $ 300,000, subject to liabilities of $ 106,000.In 1986, petitioner exchanged his ownership interest in Lots 26, 27, and 28 of the Arrowhead Lakes Subdivision for Mr. McLaughlin's ownership interest in the Angel-Royse Property. In exchange for the subdivision lots, Mr. McLaughlin forgave the $ 30,500 of outstanding principal that petitioner owed to him from the February 24, 1983, mortgage deed. Mr. McLaughlin*303  also assumed the liability for real estate taxes on Lots 26, 27, and 28, which totaled $ 1,251 at the time of the exchange. Petitioner assumed Mr. McLaughlin's share of the liabilities associated with the Angel-Royse Property. Those liabilities totaled $ 66,202 and $ 71,042, respectively, at the time of the exchange. Petitioner's basis in Lots 26, 27, and 28 was $ 40,300. On November 23, 1986, Mr. McLaughlin transferred his interest in the 74 acres of the Angel-Royse Property to Michael D. Johnson, as trustee. Petitioner was the 100-percent beneficiary of the Angel-Royse Property held in trust. Petitioner did not report any income from the exchange on a Form 1040 for the tax years at issue.On June 9, 1987, a final judgment was entered by the Circuit Court of the Ninth Judicial Circuit of Osceola County, Florida, in the case of South Fla. Water Mgmt. Dist. v. Walter Medlin, Steven Miles, Tr., and Robert Adkins, Case No. 85-943. The judgment was entered into pursuant to a stipulation for consent decree, which requires petitioner and Mr. Adkins to restore the Angel-Royse Property and to plant cypress trees. The consent decree enjoins petitioner and Mr. Adkins from further excavation*304  or dumping activities on the property.The record contains no partnership tax returns or Schedules K-1, Partner's Share of Income, Credits, Deductions, etc., and there is no evidence that any such returns or schedules were filed or distributed.                OPINIONRespondent determined that the value of the 74 acres of the Angel-Royse Property was $ 312,600, the value which was assessed by Osceola County for the two parcels of acreage. 39 Respondent determined that Mr. McLaughlin's interest had a fair market value of $ 156,300 40 and that petitioner realized a gain of $ 60,709 from the exchange in 1986. 41*305 Petitioner contends that he and Mr. McLaughlin were partners in a partnership with respect to the properties, that the Angel-Royse Property was distributed to him from the partnership, and that this distribution did not result in the recognition of any gain under section 731(a)(1). 42 Respondent argues that section 731(a)(1) does not apply because: (1) There was no distribution from a partnership to a partner; petitioner simply exchanged his 100-percent interest in the Arrowhead Lakes Subdivision lots for Mr. McLaughlin's 50-percent interest in the Angel-Royse*306  Property; and (2) no partnership existed.In order for petitioner's partnership argument to work, that supposed partnership would have had to own both the Angel-Royse Property and the Arrowhead Lakes Subdivision lots. 43 However, the form of ownership of the Arrowhead Lakes Subdivision lots was clearly a trust and not a partnership. Moreover, petitioner stipulated that he was the 100-percent beneficiary of the Arrowhead lots held in trust by Mr. Miles, and he does not dispute, and in fact incorporates, respondent's requested finding of fact that "Petitioner owned Lots 26, 27 and 28 in OR-2 (a. k. a. Arrowhead Lakes Subdivision), which were held in trust by R. Stephen Miles, Jr., Trustee." Petitioner is bound by the*307  form of ownership expressed in the stipulation and demonstrated by the record, and he cannot now argue that the Arrowhead lots were in fact held by a partnership. We agree with respondent's characterization that petitioner exchanged his 100-percent interest in the Arrowhead Lakes Subdivision lots for Mr. McLaughlin's 50-percent interest in the Angel-Royse Property and that there was no distribution of those properties from any partnership. 44 We also agree that petitioner and Mr. McLaughlin were not engaged in a partnership with respect to the Angel-Royse Property.*308 A partnership is an organization for the production of income to which each partner contributes one or both of the ingredients of income, capital, or services.  Comm'r v. Culbertson, 337 U.S. 733">337 U.S. 733, 740, 93 L. Ed. 1659">93 L. Ed. 1659, 69 S. Ct. 1210">69 S. Ct. 1210, 2 C.B. 5">1949-2 C.B. 5 (1949). In determining whether there is a partnership, we consider the following factors:   The agreement of the parties and their conduct in executing its   terms; the contributions, if any, which*309  each party has made to   the venture; the parties' control over income and capital and   the right of each to make withdrawals; whether each party was a   principal and coproprietor, sharing a mutual proprietary   interest in the net profits and having an obligation to share   losses, or whether one party was the agent or employee of the   other, receiving for his services contingent compensation in the   form of a percentage of income; whether business was conducted   in the joint names of the parties; whether the parties filed   Federal partnership returns or otherwise represented to   respondent or to persons with whom they dealt that they were   joint venturers; whether separate books of account were   maintained for the venture; and whether the parties exercised   mutual control over and assumed mutual responsibilities for the   enterprise. [ Luna v. Comm'r, 42 T.C. 1067">42 T.C. 1067, 1077-1078 (1964).]In order for there to exist a partnership, the parties must conduct some business activity. *310  Madison Gas & Elec. Co. v. Commissioner, 633 F.2d 512">633 F.2d 512, 514-517 (7th Cir. 1980), affg. 72 T.C. 521">72 T.C. 521 (1979);  Frazell v. Commissioner, 88 T.C. 1405">88 T.C. 1405, 1412 (1987);  Cusick v. Commissioner, T.C. Memo. 1998-286. And, mere coownership of property as tenants in common or otherwise does not result in a partnership. See  Bergford v. Commissioner, 12 F.3d 166">12 F.3d 166, 169 (9th Cir. 1993), affg.  Alhouse v. Commissioner, T.C. Memo. 1991-652;  Cusick v. Comm'r, supra.Petitioner testified that when he initially invested in the acreage in the Angel-Royse Property, it was "landlocked" and "it wasn't developable property." He also testified that Mr. McLaughlin held an adjoining tract of land that could provide access to the property and that Mr. McLaughlin's ownership of this tract prompted their entering into a "partnership". However, neither petitioner nor Mr. McLaughlin testified as to any development activity or plans for development on the Angel-Royse Property. Neither testified regarding whether they had any expectation of a profit from their activities and as to what kind of business activity their partnership was to engage*311  in; i. e., subdivision, development, real estate sales, etc. There is substantial evidence of record that the property was not the subject of any business activity, and, indeed, the record indicates that petitioner and Mr. McLaughlin were allowing the property to waste. 45 There is no evidence of any partnership returns' having been filed or any Schedules' K-1 having been issued to petitioner or Mr. McLaughlin. Petitioner has submitted no evidence of any partnership records, any partnership agreement, and he has not provided any discussion regarding the operations of this supposed partnership. The record shows that petitioner's and Mr. McLaughlin's relationship with respect to the Angel-Royse Property never rose above mere coownership. Petitioner has not established that he and Mr. McLaughlin formed a partnership with respect to the Angel-Royse Property, and we sustain respondent's determination that petitioner realized gain on the exchange of properties.*312  8. Prather Ranch Property (OR-01)             FINDINGS OF FACTIn 1978, petitioner and Wayne Schoolfield sought to acquire certain property owned by the Bank of Palm Beach and Trust Co., located in Orange County, Florida, which we refer to as the "Prather Ranch Property". Petitioner secured a contract with the bank for the purchase of the property, and he then located other purchasers to facilitate its acquisition. 46 On October 17, 1978, the bank sold the Prather Ranch Property to Investors Realty of Osceola, Inc., Agri-Land Corp., William L. Gibson, as trustee, 47 Mr. Prewitt, as trustee, William R. Wright (i.e., petitioner), as trustee, 48 and Marlborough Investors, Inc. At the time of its purchase, the Prather Ranch Property consisted of 1500-1600 acres and was generally flat pasture with a creek running through the property; the property was zoned agricultural.*313 In 1981, Mr. Gibson sold a portion of the property that he held in trust to third parties. On June 7, 1985, Mr. Gibson transferred the remaining property, which we refer to as "parcel 1", to Mr. Miles, as trustee, for no consideration. Petitioner was the beneficiary of a 100-percent interest in parcel 1.In March 1983, Mr. Schoolfield, Max Hagen, and petitioner entered into an agreement to trade and to purchase certain parcels of the Prather Ranch Property. 49 Pursuant to this agreement, on April 22, 1982, Agri-Land*314  conveyed its portion (parcel 2) of the Prather Ranch Property to its shareholder, Mr. Schoolfield, as trustee. On May 10, 1983, Mr. Schoolfield sold parcel 2 to Mr. Hagen, as trustee, and Mr. Hagen, in turn, sold it to Mr. Miles, as trustee, for $ 356,400. Petitioner was the sole beneficiary of parcel 2. On May 10, 1983, Mr. Wright, as trustee, conveyed parcel 3 to Mr. Miles, as trustee.*315  On September 5, 1986, Mr. Miles, as trustee, entered into a contract with Maury L. Carter to sell parcels 1, 2, and 3 for $ 1,731,000. Mr. Carter never saw an advertisement concerning the sale of this property, and Mr. Carter initiated the sale discussions with Mr. Miles. Pursuant to this contract, Mr. Miles, as trustee, sold parcel 1 for $ 120,000 on October 13, 1986. On May 13, 1987, Mr. Miles, as trustee, sold parcels 2 and 3 for $ 1,611,000. 50 Petitioner realized a gain of $ 72,039 from the sale of parcel 1 in 1986, and a gain of $ 823,079 from the sale of parcels 2 and 3 in 1987. Petitioner did not report those gains on his Forms 1040 for 1986 and 1987.At the time of the sales of petitioner's interests in the Prather Ranch Property, the property was raw land with no improvements or site development.              *316   OPINIONThe only issue with respect to the Prather Ranch Property is whether petitioner realized capital gains on the sales of the parcels in 1986 and 1987, or ordinary income. Respondent determined that petitioner realized ordinary income.In order for taxpayers to obtain preferential long-term capital gains tax rates, the gain must arise from "the sale or exchange of a capital asset". Sec. 1222(3). The term "capital asset" means "property held by the taxpayer (whether or not connected with his trade or business)", but does not include "property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business". Sec. 1221(1).In determining whether the gains that petitioner realized from the sales of the three parcels of the Prather Ranch Property were capital gains, we must ask three questions: (1) Was petitioner engaged in a trade or business, and, if so, what business?; (2) was petitioner holding the property primarily for sale in that business?; (3) were the sales contemplated by petitioner "ordinary" in the course of that business? *317  Sanders v. United States, 740 F.2d 886">740 F.2d 886, 888-889 (11th Cir. 1984);  Suburban Realty Co. v. United States, 615 F.2d 171">615 F.2d 171, 178 (5th Cir. 1980).51 The question whether property is held primarily for sale to customers in the ordinary course of one's business is "purely factual",  Pritchett v. Commissioner, 63 T.C. 149">63 T.C. 149, 162 (1974), and petitioner bears the burden of showing that the property was held as a capital asset, Guardian Indus. Corp. & Subs. v. Comm'r, 97 T.C. 308">97 T.C. 308, 316 (1991), affd. without published opinion 21 F.3d 427">21 F.3d 427 (6th Cir. 1994). See also  Pritchett v. Commissioner, supra at 164 (" Petitioner has the burden of proving that when he dealt with the parcels of land here involved he was wearing the hat of an investor rather than that of a dealer.").*318  Respondent argues that petitioner was in the business of buying and selling real estate at the time of the sales, that "petitioner agrees that he is not entitled to capital gain treatment for any of the numerous properties which he sold [in that business] during the years at issue", and that he has failed to meet his burden of demonstrating that he held the parcels as an investor, rather than a dealer. Petitioner, on the other hand, contends that he acquired the parcels with the intention of holding them as long-term investments, that he did not develop the parcels, did not advertise them for sale, did not attempt to change the zoning of the property, and that it was Mr. Carter, not petitioner, who initiated the discussions regarding the sales of the parcels.Petitioner stipulated that "Since the mid 1970s through the present, the petitioner has been in the business of buying and selling real estate and real estate development." Nevertheless, petitioner contends that his ordinary course of business is "the purchase, platting, subdividing, rezoning, and improvement of property", and since petitioner merely purchased and sold the parcels of the Prather Ranch Property, he cannot be*319  said to have sold the property in the ordinary course of his trade or business. After examining the record, the stipulation provides the proper characterization of petitioner's business activity. Petitioner was involved in real estate sales without development, as well as real estate sales that involved varying degrees of development. Indeed, there are several examples of record wherein petitioner did not engage in development prior to sale and did not make an immediate sale following purchase, and those properties were sold as part of his real estate business. We cannot find that the purchase and the sale of the Prather Ranch Property were outside petitioner's ordinary course of business. However, we must decide whether the Prather Ranch Property was held primarily for sale in that business.The U.S. Supreme Court has defined "primarily" as used in section 1221(1) to mean "principally" or "of first importance".  Malat v. Riddell, 383 U.S. 569">383 U.S. 569, 572, 16 L. Ed. 2d 102">16 L. Ed. 2d 102, 86 S. Ct. 1030">86 S. Ct. 1030 (1966). "It is, of course, well established that even though petitioner is a dealer in land, he still has the right to acquire land and hold it for investment purposes." *320  Pritchett v. Commissioner, supra at 163; see also  Maddux Constr. Co. v. Commissioner, 54 T.C. 1278">54 T.C. 1278, 1286 (1970). The taxpayer's primary holding purpose must be determined by reference to his purpose "at some point before he decided to make the sale in dispute."  Suburban Realty Co. v. United States, supra at 182; cf.  Guardian Indus. Corp. & Subs., supra at 316.At trial, petitioner testified that he viewed the Prather Ranch Property as a "long-term situation from a retirement standpoint". Keeping in mind that it is petitioner's burden to show his entitlement to capital gains treatment, we are not convinced that petitioner acquired the Prather Ranch Property as a long-term investment. 52 His purchase of this property was similar in many respects to his acquisition of other properties in his real estate business. Petitioner did not offer any evidence showing that this property, when acquired, was exceptional. The record reflects that like petitioner's acquisitions of other properties in the ordinary course of his real estate business, he intended to resell the acquired property as soon as the circumstances permitted. 53 We find, *321  on the record, and in the absence of proof to the contrary, that petitioner acquired the property as part of his real estate business. However, we must decide whether petitioner's motivation in holding the property for some time after its acquisition changed to an investment purpose.*322 At trial, petitioner testified that he became interested in putting cows on the Prather Ranch Property, that his "ultimate plan" was to move cattle to that property for grazing, and that he had a cattle guard 54 installed. Petitioner's testimony was subjective and self-serving, and we cannot accept as true his testimony that he "got in the cow business, because of this piece of property". Further, petitioner never moved any cattle to the Prather Ranch Property, 55 and, indeed, he testified that he had moved the cattle to another piece of property, which according to his testimony, was only 2 miles from his house. 56 Other than the cattle guard, petitioner*323  presented no evidence of any preparation of the property for cattle grazing or that the property was even suitable for grazing. We cannot agree that petitioner's testimony alone establishes a change in his holding purpose to investment. We hold that petitioner has not established his entitlement to capital gains treatment.*324 *325  9. Citrus County Property             FINDINGS OF FACTOn September 7, 1977, petitioner through Ms. Allen, as trustee, purchased real property in Citrus County, Florida, which we refer to as the "Citrus County Property", for $ 1,837.54. On August 10, 1981, petitioner through Ms. Allen, as trustee, transferred the Citrus County Property to Mr. Miles, as trustee. Petitioner was the sole beneficiary of this property.On July 2, 1982, Combank, the predecessors in interest of Freedom Savings & Loan Association of Tampa, Inc. (Freedom), lent $ 120,000 to Cramer, Hoffman & Haber, P. A. On July 2, 1982, petitioner guaranteed the $ 120,000 promissory note and pledged the Citrus County Property (sometimes referred to as property) as collateral. In 1983, Freedom filed a mortgage foreclosure action in the Circuit Court of Citrus County, Florida, Case No. 83-917-CA (the foreclosure case) to foreclose its mortgage interest in the property. On March 26, 1984, the parties in the foreclosure case, including petitioner as guarantor, filed a Joint Motion and Stipulation for Rendition of Final Judgment wherein they asked the court to render a final judgment of foreclosure*326  regarding the property pursuant to certain conditions. Those conditions included Freedom's forbearance of its right to foreclose in consideration for petitioner's unconditional promise to perform the terms of his guaranty and to make payments on the amounts due Freedom. Petitioner also agreed that if those payments were not made as scheduled, then Freedom could proceed with the foreclosure. On October 11, 1985, Freedom filed a motion for final judgment of foreclosure against the property averring that the required payments had not been made in accordance with the parties' March 26, 1984, stipulation. 57 On October 25, 1985, pursuant to the stipulation, the court entered a Final Judgment of Foreclosure. Pursuant to the judgment, the property was sold and title was conveyed to the purchaser, Freedom, on November 25, 1985.In 1983, Freedom*327  filed a separate action in the Circuit Court for Orange County, Florida, Case No. 83-12119 (the judgment case), for judgment against petitioner and two other guarantors of the loan to Cramer, Hoffman & Haber, P. A. On September 16, 1986, Freedom filed a Motion for Final Judgment against petitioner seeking money judgment for the unpaid balance of the note that he guaranteed. In a pleading that petitioner filed on October 8, 1986, petitioner represented that the only issue in the judgment case that remained was the value of the property that had been sold pursuant to the prior foreclosure action in Citrus County. On December 22, 1986, the Circuit Court for Orange County rendered final judgment finding that petitioner should be given credit for the fair market value of the Citrus County Property and found that the fair market value was $ 87,000. The Circuit Court's final judgment then determined that petitioner owed a remaining $ 20,834 on his guaranty obligation. On December 31, 1986, petitioner asked for rehearing claiming that at the time of the foreclosure sale in 1985, the Citrus County Property had a fair market value far in excess of $ 87,000. Petitioner alleged that the Citrus*328  County appraiser's records indicated a fair market value of $ 133,000 and that petitioner's testimony was that the property value was, at an "absolute minimum", at least $ 114,000. Based on petitioner's averments, the Circuit Court for Orange County granted a rehearing as to the fair market value of the Citrus County Property. There is no evidence that a rehearing ever occurred. The parties eventually reached a settlement, and on October 28, 1987, Freedom filed a Satisfaction of Judgment stating that the $ 20,834 had been fully satisfied. Thus, petitioner's remaining personal liability on his guaranty was resolved approximately 2 years after the foreclosure sale had become final.Petitioner's basis in the property at the time of the foreclosure sale was $ 1,844.                OPINIONRespondent has raised as a new matter in his amendment to answer an allegation that petitioner realized a gain of $ 112,156 from the foreclosure sale in 1985. 58 Respondent agrees that he bears the burden of proof on this issue under Rule 142(a).*329 The transfer of property in a foreclosure sale represents a sale or exchange for tax purposes. Helvering v. Hammel, 311 U.S. 504">311 U.S. 504, 85 L. Ed. 303">85 L. Ed. 303, 61 S. Ct. 368">61 S. Ct. 368 (1941);  2925 Briarpark, Ltd. v. Commissioner, 163 F.3d 313">163 F.3d 313, 318 (5th Cir. 1999), affg. T.C. Memo. 1997-298;  Cox v. Commissioner, 68 F.3d 128">68 F.3d 128, 133 (5th Cir. 1995), affg. T.C. Memo. 1994-189;  Yarbro v. Commissioner, 737 F.2d 479">737 F.2d 479, 485 (5th Cir. 1984), affg. T.C. Memo. 1982-675;  Aizawa v. Commissioner, 99 T.C. 197">99 T.C. 197, 198 (1992), affd. without published opinion 29 F.3d 630">29 F.3d 630 (9th Cir. 1994). Under section 1001(a), the amount of gain realized from a sale or exchange is the excess of the amount realized over the taxpayer's adjusted basis in the property. In the case of recourse debt, the amount realized from the transfer of property in a foreclosure sale is the fair market value of the property on the date of the sale.  Frazier v. Commissioner, 111 T.C. 243">111 T.C. 243, 245 (1998); *330  Marcaccio v. Commissioner, T.C. Memo 1995-174">T.C. Memo. 1995-174. The amount realized from a sale or other disposition of property includes the amount of liabilities from which the transferor is discharged as a result of the sale or other disposition.  2925 Briarpark, Ltd. v. Commissioner, supra at 317; sec. 1.1001-2(a)(1), Income Tax Regs. Any unpaid portion of the recourse debt in excess of the fair market value of the property is not used to calculate the amount realized from a sale under section 1001(b). See  2925 Briarpark, Ltd. v. Commissioner, supra at 318 n. 2;  Marcaccio v. Comm'r, supra.Respondent contends that petitioner realized at least $ 114,000 in the 1985 foreclosure sale of the Citrus County Property. He relies upon petitioner's position in the deficiency judgment proceedings that the fair market value of that property was at least $ 114,000 at the time of the foreclosure sale. We cannot agree that respondent has established that the fair market value of the Citrus County Property was at least $ 114,000 on the date of the foreclosure sale. The Orange County Circuit Court found that the Citrus County Property had a fair market value of $ 87,000*331  at the time of the foreclosure sale. The court gave petitioner credit for $ 87,000 and then entered a deficiency judgment of $ 20,834 against petitioner, which represented petitioner's remaining personal liability as guarantor. Although final judgment was stayed for the introduction of additional evidence as to fair market value, no such evidence appears to have been submitted, and, in any event, the parties settled the matter and Freedom filed a Satisfaction of Judgment stating that the $ 20,834 deficiency judgment had been satisfied. We find that the fair market value on the date of the foreclosure sale was $ 87,000, the amount determined by the Circuit Court.We must also reject petitioner's argument that he is not required to recognize gain from the foreclosure sale, because he was not the borrower of the original loan proceeds and received no benefit therefrom. Petitioner argues:   The law is clear that to realize gain based upon market value of   property transferred, the transfer must be in consideration of   the discharge or reduction of indebtedness. This gain is not   realized when the indebtedness is based upon a guaranty and the   taxpayer*332  received none of the loan proceeds.Petitioner cites  Landreth v. Commissioner, 50 T.C. 803">50 T.C. 803 (1968);  Payne v. Commissioner, T.C. Memo. 1998-227, revd. on other grounds 224 F.3d 415">224 F.3d 415 (5th Cir. 2000); and  Whitmer v. Commissioner, T.C. Memo. 1996-83, in support of his position. We find those cases distinguishable in that they dealt with discharge of indebtedness income of a guarantor, not gain realized from the sale of the guarantor's property at a foreclosure sale.In  Frazier v. Commissioner, supra at 248, we achieved parity between the tax results to a party owning property sold in a foreclosure sale and the tax results to the willing seller who sells the property in an arm's-length transaction to a willing buyer, "neither being under compulsion to buy or sell and both having reasonable knowledge of relevant facts." 59 Applying that approach in this case, if petitioner sold the Citrus County Property to a willing buyer for its fair market value of $ 87,000, and then transferred the sale proceeds in partial satisfaction of his personal liability as guarantor, he would have realized $ 85,156 ($ 87,000 amount realized*333  minus $ 1,844 basis). On the facts presented, we hold that petitioner realized $ 85,156 on the foreclosure sale to Freedom.C. Miscellaneous Items of Schedule C Income             FINDINGS OF FACTOn February 6, 1985, petitioner deposited $ 37,500 into his bank account with Freedom Savings & Loan Association. The record contains a check of $ 37,500 from Orange Valley Real Estate Exchange, Inc., to the order of Metro Realty Association. The spreadsheets that petitioner used to complete his tax returns list this amount under "Sales & Comm". Petitioner reported this amount as a part of his gross profit*334  from his real estate business on Schedule C of his 1985 return.Petitioner received net commission income of $ 598 from National Land Commissions in 1986.On July 1, 1985, petitioner deposited checks from Crazy Commandos of $ 250 for rent from June 15 to 30, 1985, and $ 500 for rent from July 1 to 31, 1985. Petitioner also deposited $ 500 of rent from Crazy Commandos into his Freedom account on September 3, 1985. Petitioner received rents of $ 1,250 from Crazy Commandos in 1985.Petitioner received $ 400 in 1985 from the sale of 100 wax myrtle trees.                OPINIONGross income means all income from whatever source derived, including compensation for services, commissions, gross income derived from business, gains derived from dealings in property, rents, etc. Sec. 61(a). Petitioner does not contest respondent's determinations in the notice of deficiency, his requested findings of fact, or his arguments on brief with respect to the amounts that petitioner received. Petitioner has abandoned any arguments he may have made with respect to those amounts. We hold that petitioner is taxable for the various amounts described above as determined*335  by respondent.D. Schedule E Income             FINDINGS OF FACTPetitioner owned stock in Frank's Corner, Inc., an S corporation. Frank's Corner filed a Schedule K-1 (Form 1120S), Shareholder's Share of Income, Credits, Deductions, etc., relating to petitioner for 1987. The Schedule K-1 reported ordinary income of $ 4,492 and a section 179 deduction of $ 604. Petitioner did not report any income from Frank's Corner on his 1987 return. Respondent determined that petitioner realized income of $ 3,888 ($ 4,492 -$ 604) in 1987, which should have been reported on Schedule E, Supplemental Income and Loss (from rental real estate, royalties, partnerships, S corporations, estates, trusts, REMICs, etc.). On his 1988 return, petitioner reported a loss of $ 4,702 from Frank's Corner, which matches the loss reported on the Schedule K-1 for that year.                OPINIONA shareholder in an S corporation must take into account, in determining his tax, the shareholder's pro rata share of the S corporation's "nonseparately computed income or loss". Sec. 1366(a)(1)(B). Nonseparately computed income or loss means gross income*336  minus the deductions allowed to the corporation. Sec. 1366(a)(2). In other words, the taxpayer is responsible for his distributive share of income realized by an S corporation in which he is a shareholder. See  Ishler v. Comm'r, T.C. Memo 2002-79">T.C. Memo 2002-79.Petitioner presents no challenge to respondent's determination, and he has therefore abandoned any arguments he might have presented. We hold that petitioner realized Schedule E income as determined by respondent and that petitioner should have reported that amount on his 1987 return.E. Unidentified DepositsBank deposits are prima facie evidence of income.  DiLeo v. Commissioner, 96 T.C. 858">96 T.C. 858, 868 (1991), affd. 959 F.2d 16">959 F.2d 16 (2d Cir. 1992). "Where the petitioner has failed to maintain adequate records as to the amount and source of his income, and the Commissioner has determined that the deposits are income, the petitioner has the burden of showing that the determination is incorrect",  Estate of Mason v. Commissioner, 64 T.C. 651">64 T.C. 651, 657 (1975), affd. 566 F.2d 2">566 F.2d 2 (6th Cir. 1977), and he must prove by a preponderance of the evidence that the deposits came from a nontaxable source, *337 Rule 142(a);  Kudo v. Comm'r, T.C. Memo. 1998-404, affd. 11 Fed. Appx. 864">11 Fed. Appx. 864 (2001). All money deposited into a taxpayer's bank account is presumed to represent taxable income,  Price v. United States, 335 F.2d 671">335 F.2d 671, 677 (5th Cir. 1964). Except where he bears the burden of proof, e. g., fraud, the Commissioner need not prove a likely source of the unreported income.  Clayton v. Commissioner, 102 T.C. 632">102 T.C. 632, 645 (1994);  Tokarski v. Commissioner, 87 T.C. at 77. Also, he is not required to prove that all deposits made by the taxpayer are income.  Estate of Mason v. Commissioner, supra at 657;  Gemma v. Commissioner, 46 T.C. 821">46 T.C. 821, 833 (1966).1. Deposit on March 12, 1985, of $ 59,000             FINDINGS OF FACTOn March 4, 1985, a $ 70,000 check from Washington International Bank & Trust Ltd. (Washington International), was deposited into petitioner's Freedom bank account (account No. XXXXXX4809). Respondent did not determine that this deposit represented unreported income. On March 11, 1985, a check (No. 601) for $ 63,212.50 was drawn on petitioner's Freedom account. *338  This check was payable to the order of "Freedom Financial Center" and was endorsed by Ms. Allen. The account balance was reduced from $ 64,775.80 to $ 1,563.30 as a result of this check.On March 11, 1985, petitioner purchased a cashier's check for $ 59,000 from Freedom. Petitioner was listed as both the remitter and the payee. On March 12, 1985, petitioner deposited the proceeds of this check into his Tucker State Bank account. Respondent determined that the $ 59,000 deposit was taxable as income to petitioner for 1985.                OPINIONPetitioner contends that the March 12, 1985, deposit of $ 59,000 was traceable to the $ 70,000 check from Washington International and that respondent did not determine that the proceeds of this check represented unreported income. Petitioner argues that after the $ 70,000 check was deposited to his Freedom account, Ms. Allen made a withdrawal of $ 63,212.50 in the form of check No. 601 and used the proceeds to purchase the $ 59,000 cashier's check payable to Mr. Medlin and deposited in his Tucker bank account.Petitioner did not question Ms. Allen at trial regarding her endorsement on check No. 601 and*339  whether she used that check to purchase the $ 59,000 cashier's check from Freedom. Petitioner could not establish at trial, and has not established on brief, the appropriate link between the $ 59,000 deposit, the purchase of the $ 59,000 cashier's check, the $ 63,212.50 check signed by Ms. Allen, and the $ 70,000 check from Washington International. Petitioner has not explained why the cashier's check and the Tucker account deposit are for $ 59,000, while the check signed by Ms. Allen is for $ 63,212.50, and where the $ 4,212.50 excess ended up. His explanation at trial was for the most part confusing.Petitioner claims that since check No. 601 caused a decrease of $ 63,212.50 in his Freedom account and that since check No. 601is payable to the order of "Freedom Financial Center", the proceeds of that check must have been used to purchase the $ 59,000 cashier's check from Freedom. Petitioner assumes too much. He assumes that he and Ms. Allen did not have other accounts with Freedom, that he and Ms. Allen did not engage in other transactions with Freedom, and, most importantly, that "Freedom Savings and Loan Association" is the same entity as "Freedom Financial Center". 60 Petitioner*340  assumes, but fails to establish, those matters. In any event, petitioner's claim fails again to account for the $ 4,212.50 difference between the amount of the cashier's check and the amount of check No. 601.Even if we were to assume that the deposit of $ 59,000 is traceable to the $ 70,000 received from Washington International, petitioner has not established that this is a nontaxable source of income. Petitioner relies on the fact that respondent failed to determine in the notice of deficiency that this amount represented unreported income. However, this alone does not establish an income source to be nontaxable. Respondent may have had a wide range of valid reasons for not targeting this particular item for an increased deficiency, including*341  lack of information and records. Those reasons do not indicate that the source is a nontaxable one, especially given the particular circumstances of this case where moneys are being moved around through a variety of entities, individuals, transactions, and trust accounts.Petitioner claims that the $ 70,000 check from Washington International was a loan, because "The evidence as to Washington International was that it loaned money secured by real estate (TR- 412, 453)." At trial, John Kelly testified with respect to petitioner's Washington International account, i. e., the Cayman Island account, that "it was basically a loan account. He would pledge property as collateral, and they would advance him funds against his property. And subsequently he would repay the loan either from other funds or through sales of the property." Mr. Kelly also testified that "Mr. Medlin would transfer title to pieces of property -- or a security interest in pieces of property -- not title -- to the Cayman bank. The Cayman bank would then advance him funds using the property as a security. Mr. Medlin would then repay the loan in time."At best, John Kelly's testimony provides a possible explanation for*342  what the $ 70,000 check represented. Petitioner has offered no additional evidence or testimony to establish his claim that the check was a loan. Importantly, he does not argue, nor has he shown, that title to, or a security interest in, property was ever transferred to Washington International for what he purports to be $ 70,000 in loan proceeds. Mr. Kelly's testimony that Washington International and Mr. Medlin were generally involved in loan transactions does not establish that this amount was a loan. Indeed, his testimony was inconsistent with petitioner's testimony at trial that he used the Washington International trust account as a vehicle for deferring income from real estate sales. Petitioner has not established a link between the unreported deposit and a nontaxable source of income. We sustain respondent's determination that the $ 59,000 deposit is taxable as income to petitioner.2. Deposit on September 16, 1986, of $ 84,521.63             FINDINGS OF FACTOn September 16, 1986, $ 84,521.63 was deposited into Mr. Miles's trust account. Ledger card No. 70042 for that trust account is entitled "Walter Medlin" and "Re $ Partin". 61 Lines 3*343  through 6 of that ledger card contain the following notations:Date         Name         Memo      ReceivedDisbursed____         ____         ____      _________________9-16-86   Michael Bast       Medlin/Partin   $ 84,521.63     --9-16-86   Natl. Land & Inv. Inc  Medlin/Partin    1,000.00     --9-18-86   Transferred to Partin       Sybil card          --        --   $ 84,521.639-18-86   Transferred to Partin       Sybil card          --        --     1,000.00Respondent determined that the deposit of $ 84,521.63 was taxable as income to petitioner for 1986.      *344            OPINIONPetitioner contends that he did not receive the benefit of the deposit of $ 84,521.63 on September 16, 1986, that the amount deposited related to a transaction between Michael Bast and Sybil Partin that did not involve petitioner, that the entry on the ledger card was a mistake, and that this mistake was corrected 2 days later with a transfer to the correct ledger card.At trial, petitioner testified that he did not receive any of the proceeds of the $ 84,521.63 deposit and that he had no interest in the sale of property from Ms. Partin to Mr. Bast. Petitioner testified that the entry on the Medlin/Partin ledger card must have been a mistake:     And because of my relationship with Mike and having a real   estate license and being interested in real estate as well as   his cattle business, I kind of got first shot at buying a couple   pieces of property. And one of them was a Breckenridge piece   that is subject to this. I forget what the other piece was.     But because of my relationship with Mike, a couple people   had come to me. One of them was Mr. Schoolfield. I believe he *345    bought the parcel that Doc Partin had gotten. I wasn't   interested in it.     And so Mike Bast had come to me and asked me if I was   trying to buy Sybil's piece and/or if I could help him buy it.   And, basically, I, you know, told him I wasn't interested in it.   I couldn't -- I had all I could afford at the time. And, so I   took him to Mike Partin  -- they really knew each other -- but I   basically took him to Mike Partin and said, Mike and Mike, why   don't you all get together on Sybil's behalf because Mike, Mr.   Mike Partin who was here, and his wife had been handling his   aunt's, who is Sybil, handling all her affairs and helping   handle her cattle because she was a widow. And I think she was   the only sister in the group, I believe, so she didn't have any   help. Anyway, I kind of put the deal together for them, put the   two of them together, and recommended that Mike take Aunt Sybil   over to Steve Miles and have him do the closing and so forth.     And, I think, because of my PR position in the middle,   dealmaker or whatever, it got put on*346  one of my cards by Alana, I   think. Then, it appears, that a couple days later, Mr. Miles --   and again I'm guessing by looking at this -- had said, Wait a   minute. This is not Medlin's deal. Start a card that says Sybil   Partin and transfer everything to Sybil Partin's card. I'm   surmising this. I haven't discussed this with Mr. Miles. I've   heard his testimony and Alana's testimony as to kind of how   these things happen.Mr. Miles referenced various checks accompanying ledger card No. 70042 and concluded that the references to "Partin" on that card must refer to "Edward L. Partin", known as "Geech Partin", and "Constance Partin". Mr. Miles testified that the property referred to in ledger card No. 70042 "was known or later developed as Anorada Subdivision". Mr. Miles then testified about the entries at issue:   Q Well, if you look at again 70042, you see this Michael Bast   payment of $ 84,521.   A Yes.   Q And then, the same amount, $ 84,521.63, was transferred to,   according to the notation there, Partin, Sybil card. Do you see   that?   A That's correct.   Q And*347  Partin, Sybil card is a card that you apparently   maintained for a Partin, Ms. Sybil Partin?   A Yes.   Q Was she also a client of yours that you performed trustee   activities for?   A I don't know that we ever held anything in trust for Sybil   Partin. We just represented her in connection with the   transaction with Mr. Bast, I believe.   Q Okay, So would it be fair to say that, from looking at this,   while Mr. Bast sent a check and it originally got placed onto   this card that relates to Mr. Medlin, that the same amount of   funds was then, two days later, transferred over to the benefit   of Sybil Partin?   A Yes. And it looks like it was just a mistake in putting it on   this card to start with, because to my knowledge Mr. Bast did   not have anything to do with the property that Mr. Medlin   acquired from Geech and Connie Partin. Mr. Bast bought property   from Sybil Partin.     And there's a lot of Partins in Osceola County. And when   this check came in, it probably just said Partin on it, and   Alana put it on here. I don't*348  know. Did you all ask her about it   when she was here?   Q No, I didn't.   A Oh. Okay. She could probably tell you better than I could.   Q But that kind of a mistake would have been corrected through   the transfer that we see on there?   A That's correct.   Q And that's your memory of it now?   A I don't have any memory of it. Just looking at that and   knowing the cast of characters, I think that's what happened.Mike Partin, who was personally involved with the Sybil Partin/Michael Bast transaction, also testified that petitioner had no ownership interest in the property sold to Mr. Bast, that Sybil Partin was the owner of the property, and that Mr. Bast was the purchaser.Although petitioner did not question Ms. Goodman regarding the deposit entry and the purported correction, Ms. Goodman was questioned generally about the ledger system she maintained. She testified that the ledger system did not involve actual physical transfers but was "simply a bookkeeping trace". Ms. Goodman testified that when a transfer was made to another ledger card, "I would write, Moved, on the card that it came from, and*349  I would write either Received or Transferred from the card that it came from."On the basis of the testimony offered at trial, we are satisfied that petitioner did not have an ownership or other interest in the property sold by Sybil Partin to Michael Bast and that the payment from Michael Bast was mistakenly entered on the Medlin/Geech Partin ledger card, ledger card No. 70042. Although petitioner's testimony was, as a general matter, self-serving and less than credible at trial, his testimony regarding his involvement in the Sybil Partin/Michael Bast property transaction was detailed and supported by the testimony of Mr. Miles and Mike Partin. Given that petitioner lacked any discernible interest in that transaction, petitioner's contention that the entry on ledger card No. 70042 was a mistake is supported by the record. The ledger card shows a deposit of $ 84,521.63 followed 2 days later by a transfer in that same amount to the Sybil Partin ledger card. Mr. Miles confirmed that these entries were consistent with the procedures he and his bookkeeper followed with respect to a mistaken entry. Ms. Goodman's general testimony establishes that the initial deposit of $ 84,521.63 was*350  indeed transferred to the Sybil Partin card given the notation "Transferred to Partin Sybil card". We hold that the $ 84,521.63 deposit is not income to petitioner.3. Deposit on April 9, 1987, of $ 67,740             FINDINGS OF FACTOn April 9, 1987, petitioner deposited $ 67,740 into his Tucker bank account No. XXXX8066. 62 A memorandum dated October 19, 1993, from Revenue Agent Sherri Blackton to Special Agent Linda Ford states with respect to the source of this deposit:     At 12:35 p.m. today, Mr. Larry Blackwater of Community   First Bank of Winter Garden returned my call. I explained that I   had a question regarding a deposit*351  made to Mr. Medlin's account   number 18066 on April 9, 1987 in the amount of $ 67,740. The   deposited item we received in response to the summons previously   issued to the bank indicated the money was transferred from   another account. (# XXX9234) I explained that I needed to   identify the originating account owner. * * *           *   *   *   *   *   *   * At 1: 08 p. m. Mr. Blackwelder called to report that the   originating account belonged to Mr. Medlin and that he thought   we were provided with copies of the statements, etc. to that   account. He stated his research indicated that a $ 90,000 check   from Orlando Land and Investment, less a $ 22,260 cashier's   check, was deposited to account number XXX9234. The $ 67,740 was   then immediately transferred to account number X8066.A "Transfer of Funds" statement by Tucker State Bank states: "On the date indicated above [4/9/87], we made the following transfer of funds between your accounts, according to your instructions received by phone * * *. We have charged your account for this transfer From XXX9234 to XXXX8066." *352  The statement is to "Walter L. Medlin" and shows an amount of "$ 67,740.00".Orlando Land & Investment Co. issued a check dated April 3, 1987, for $ 90,000, which is payable to the order of petitioner and which contains the notation "FOR Loan". A deposit ticket for Mr. Medlin's Tucker bank account No. XXX9234 dated April 8, 1987, shows the deposit of a check for $ 90,000 from "Orl. Land & Investment", "LESS CASHIERS CHECK in the amount of $ 22,260.00"; this resulted in a net deposit of $ 67,740 to account No. XXX9234.On April 6, 1987, petitioner executed a promissory note for the benefit of Don Henry and Sylvia Cohn, which provided:   90,000.00 4/6/1987   Ninty (90) days after date, the undersigned, for value   received jointly and severally promise to pay to the order of   Don Henry and/[illegible entry] Sylvia Cohn at   OrlandoFla. Ninty Thousand ($  90,000) + Twenty   Thousand ($  20,000) dollars with interest from date at   the rate of  ---- % per annum until fully paid. Interest   payable  ---- . This note shall bear interest from   maturity at the rate of  ---- % per annum until fully   paid.The*353  promissory note is signed by petitioner. Don Henry was the president of Orlando Land & Investment Co.Respondent determined that the deposit of $ 67,740 was taxable as income to petitioner for 1987.                OPINIONPetitioner contends that the deposit of $ 67,740 on April 9, 1987, represents a portion of the loan proceeds received from Don Henry of the Orlando Land & Investment Co.Respondent agrees that "The source for the deposit was a check for $ 90,000 from Orlando Land & Investment". Accordingly, the April 9, 1987, deposit is not unidentified as respondent originally determined. Nevertheless, respondent argues that this check was not a loan from Don Henry and Sylvia Cohn. He argues that the promissory note that petitioner relies upon shows Don Henry and Sylvia Cohn as the obligees, not Orlando Land & Investment Co., and that the check from that entity was not a check from those obligees.Since respondent has conceded the source of the formerly unidentified deposit, we are concerned only with whether that was a nontaxable source. We note that respondent did not determine an increased deficiency based on the $ 90,000 check, although*354  his failure to do so is not conclusive, see supra. At trial, petitioner testified that the deposit was attributable to proceeds lent to him by Don Henry. Respondent concedes that Don Henry was the president of Orlando Land & Investment Co., and we have found that as fact. Although this fact alone does not establish a connection between the check of $ 90,000 and the promissory note of $ 90,000, we believe the evidence as a whole shows a sufficient connection beyond mere coincidence. We hold that the deposit of $ 67,740 is not taxable as income to petitioner.4. Deposit on July 8, 1988, of $ 140,000             FINDINGS OF FACTOn July 8, 1988, $ 140,000 was deposited into Mr. Miles's law firm's trust account for petitioner. Ledger card No. X0269 for that trust account is entitled "Walter Medlin", "Prather Ranch Property", and "see also Maury Carter". Line 21 of the ledger card contains the following information:Date       Name            Memo      Received____       ____            ____      ________7-8-88   Walter Medlin       Medlin/Prather   *355  $ 140,000Line 22 of this same ledger card contains the following entry: Date        Name            Memo       Disbursed ____        ____            ____       _________7-12-88   moved to Medlin/Partin        --       $ 97,893.787-13-88   moved to Medlin/Malfa    (24,529.00 + 342.72)   24,871.727-13-88   moved to Medlin/general               17,234.50Ledger card No. 70042, entitled "Walter Medlin" and "Re $ Partin", contains the following entries on lines 10, 11, and 12, which were related to the transfer to the ledger card noted in line 13 below:Line    Date       Name          Memo     Received   Disbursed____    ____       ____          ____     ________   _________10   7-12-88   Edward L. and        Constance A. Partin    Medlin/Partin     --   $ 89,615.9611  7-12-88   Mike Partin        Medlin/Partin     --    5,094.0412  *356 7-12-88   W. G. Boyd        Medlin/Partin     --    3,183.7813   7-12-88   Rec from Medlin/Prather     --    $ 97,893.78    --The record contains a Dean, Witter, Reynolds, Inc. (Dean Witter), check (No. 69566) dated July 7, 1988, for $ 140,000, which is payable to the order of the "Stephen Miles Trust Account". The stub to that check is signed as "RECD BY Richard Margolis". A deposit statement for the "Miles & Cumbie P. A. Trust Account", dated July 8, 1988, lists check "1-23" for $ 140,000. This deposit statement was filled out by Alana Goodman. Ms. Goodman was Mr. Miles's bookkeeper, and she made the entries into the ledger cards. Ms. Goodman matched the number "1-23" listed on the deposit statement to the bank tracing number "1- 23" on the Dean Witter check.Respondent determined that the deposit of $ 140,000 was taxable as income to petitioner for 1988.                OPINIONPetitioner argues that the deposit on July 8, 1988, of $ 140,000, was traceable to a loan from Richard Margolis, that the loan proceeds were needed to make a mortgage payment on the Partin property, and that "The loan was*357  secured by being structured as a sale and option to buy back from Margolis rather than a mortgage to Margolis." Respondent agrees that $ 97,893.78 was transferred from the Medlin/Prather Ranch ledger card to the Medlin/Partin ledger card and that checks were written for the Medlin/Partin property on that same date; however, respondent disagrees that the deposit for $ 140,000 and the subsequent transfers establish that a loan was made. We agree with respondent.We find that petitioner has established that the source of the $ 140,000 deposit was the Dean Witter check of $ 140,000. That check was dated July 7, 1988, the day before the unidentified deposit to the Medlin/Prather Ranch Property card. Ms. Goodman testified that she always used the bank tracing number for checks when making deposits. As such, she was able to match the bank tracing number on the Dean Witter check to the bank tracing number of a check listed on a deposit statement for the Miles & Cumbie P. A. Trust Account. The deposit statement is dated July 8, 1988, the check is in the amount of $ 140,000, and the deposit slip was filled out by Ms. Goodman. Petitioner has shown that the issuance of the $ 140,000 Dean Witter*358  check on July 7, 1988, the deposit of $ 140,000 to Mr. Miles's law firm's trust account on July 8, 1988, and the deposit entry of $ 140,000 on the Medlin/Prather Ranch Property ledger card were more than mere coincidences and that the source of the deposit entry was the Dean Witter check. Nevertheless, petitioner has not shown that the Dean Witter check was a loan; i. e., that the check was a nontaxable source of income. See  Polidori v. Commissioner, T.C. Memo 1996-514">T.C. Memo. 1996-514.At trial, petitioner testified that he needed to make a mortgage payment on what petitioner refers to as the Partin property, that he called Richard Margolis up and told him he needed some money, and that Mr. Margolis lent him the $ 140,000 at issue. Petitioner testified that Mr. Margolis's representative recommended:   rather than do a mortgage, have me deed them the property, or   deed or convey them the beneficial interest in the property, if   I only held the beneficial interest, and then give me an option   to buy it back at this continually accelerating price, which was   reflective of the interest rate. And that's what happened here.Petitioner claims that this*359  recommendation was followed and that the property he put up as collateral was the Partin property. Petitioner also testified that he used some of the proceeds from the Margolis "loan" to make his mortgage payment, and he also described the various ledger entries:   Q Okay. And did you use some of the proceeds of the $ 140,000   loan, after you had conveyed the property to Mr. Margolis, to   make a payment on that very property, on the mortgage already   existing on that very property?   A Yes, sir.   Q And is that reflected in 70042 ledger card of 93-R?   A Yes, sir, but you sort of have to go back to 70501. And you   can see where a portion on the next line from the entry of the  $ 140,000 -- you can see on line 22, it says, 7/12/88, moved to   Medlin/Partin, $ 97,893.78.     And then you go to the -- as Mrs. Goodman explained, that   was her way of getting the money out of, in this case off the   Prather Ranch card onto the Partin card. So, I guess kind of an   attempt to, all this gets very confusing and we probably should   have, somebody should have done better -- *360  I didn't keep these   cards. They may have been in worse shape. But just trying to   keep track of this stuff. But in this case, she moved it.     The $ 140,000 probably should have been put on the Partin   card to begin with. And it had nothing to do with the Prather   Ranch. But she put it there and we've seen it before, and we'll   probably see it again, where she put stuff on the wrong card.   But it's not the end of the world. It's correctable. She makes   an entry and says, I'm moving this over to the Partin card. It   was moved to the Partin card on line 13, same date 7/12/88, and   it says, Received from Medlin/Prather 97,893.78.   Q And did you then use that to make a payment out?   A Yes, sir.   Q Does that show there?   A Yes, sir. Those are reflected in the columns above, 10, 11,and 12.   Q So then the source of this $ 140,000 unknown deposit on ledger   card 70501, on 93-R, is the loan from Mr. Margolis?   A Yes, sir.Unlike petitioner's testimony with respect to the deposit of $ 84,521.63 on September 16, 1986, petitioner's testimony*361  with respect to this deposit cannot be substantiated with the testimony of other witnesses or with evidence of record. Petitioner did not call Richard Margolis to testify, and he did not submit any evidence or documentation to show that the $ 140,000 Dean Witter check was a loan from Mr. Margolis. 63 Accordingly, we find petitioner's testimony to be self-serving and of no assistance to him.Petitioner expends considerable effort to establish that on July 12, 1988, $ 97,893.78 was transferred from the Medlin/Prather Ranch Property ledger card (no. 70501) to the Medlin/Partin ledger card (no. 70042), and that on that same date, $ 97,893.78 was disbursed to Edward L. and Constance*362  Partin, Mike Partin, and W. G. Boyd from the Medlin/Partin ledger card. However, this has little relevance in determining whether the $ 140,000 Dean Witter check was a nontaxable source of income; i. e., a loan. Moreover, the considerable difference between the amount of the Dean Witter check, $ 140,000, and the total amount of the disbursements, $ 97,893.78, contradicts petitioner's testimony that the purpose of the loan was to make a mortgage payment. 64Also, we are not inclined to accept petitioner's testimony that the entries on the Medlin/Prather Ranch Property ledger card were mistaken entries by Ms. Goodman that were subsequently corrected. Unlike the deposit in 1986, which we held was attributable to a mistaken entry, the entry on the ledger card at issue here was not simply corrected with a transfer in an equivalent amount to another*363  card. Instead, there were three offsetting entries: (1) A transfer to the Medlin/Partin ledger card on July 12, 1988, of $ 97,893.78; (2) a transfer to the Medlin/Malfa card on July 13, 1988, of $ 24,871.72; and (3) a transfer to the Medlin/general ledger card on July 13, 1988, of $ 17,234.50. We cannot conclude that the deposit entry on the Medlin/Prather Ranch Property was necessarily a mistake and that the $ 140,000 should have been transferred to the Medlin/Partin ledger card. We sustain respondent's determination that the $ 140,000 deposit represents taxable income to petitioner.5. Other Deposits             FINDINGS OF FACTOn May 6, 1986, petitioner deposited $ 300 into his Freedom account. On August 1, 1986, a deposit of $ 9,038.47 was made to Mr. Miles's law firm's trust account. On October 10, 1986, $ 300 was deposited into Mr. Miles's law firm's trust account for petitioner. Respondent determined that those deposits were taxable as income to petitioner.                OPINIONPetitioner does not discuss on brief the deposit of $ 300 on May 6, 1986. We find that he received that item as income.In respondent's*364  reply brief, he concedes that the deposit of $ 9,038.47 on August 1, 1986, to Mr. Miles's law firm's trust account was not income to petitioner.Petitioner does not discuss on brief the deposit of $ 300 on October 10, 1986. We find that he received that item as income.F. Deductions Claimed by Petitioner1. Schedule C Real Estate Business Deductions             FINDINGS OF FACTPetitioner claimed deductions on the Schedules C for his real estate business on his returns for 1985 through 1988. Those deductions were claimed on the basis of the spreadsheets that petitioner prepared for the deposits and disbursements from his personal bank accounts. Petitioner's spreadsheets classified the various disbursements as expenditures for automobiles, dues and subscriptions, office, telephone, utilities, interest, maintenance and repair, travel and entertainment, licenses and taxes, commissions paid, insurance, and miscellaneous. Those disbursements were then claimed on the Schedules C as deductions from the gross income he reported for his real estate business. Respondent reconstructed petitioner's expenses from buying and selling real estate for 1985 through*365  1988. See appendix A. In reconstructing petitioner's expenses, respondent disallowed many of the deductions petitioner claimed for a failure to substantiate or a failure to show an ordinary and necessary business expense for purposes of section 162. Respondent allowed deductions for petitioner's real estate business in much larger amounts than petitioner originally claimed on his returns. 65                OPINIONPetitioner did not present any evidence that respondent erred in reconstructing his Schedules C real estate expenses. Petitioner does not present any arguments on brief relating to his Schedules C real estate expenses or respondent's reconstruction of*366  those expenses. Petitioner's only argument relates to certain deductions he claims for alleged expenses from his orange grove, cattle, and Ferrari automobile collection activities. We hold that petitioner has conceded any arguments relating to respondent's reconstruction of the allowable expenses for his real estate business.2. Personal Residence Interest             FINDINGS OF FACTOn August 31, 1981, petitioner purchased his personal residence in Osceola County, Kissimmee, Florida, from Walter E. and Maxine J. Melitshka. 66 Petitioner borrowed certain amounts from the Melitshkas for the purchase of this residence. The amount of the loan, the interest rate, the repayment terms for the loan, and the actual amount of interest petitioner paid during tax years 1985, 1986, 1987, and 1988 were not established on the record.*367                 OPINIONRespondent determined that petitioner was entitled to deductions for mortgage interest paid on his personal residence of $ 24,957, $ 0, $ 41,759, and $ 16,249 for 1985, 1986, 1987, and 1988, respectively. Petitioner does not challenge those determinations on brief, and, accordingly, he has conceded the matter. We sustain respondent's determination of the allowable mortgage interest expenses.3. Orange Grove, Cattle, and Ferrari Activities             FINDINGS OF FACTPetitioner had an orange grove of approximately 800 trees near his personal residence, which covered approximately 17 to 18 acres. When petitioner moved to his personal residence in or about 1981, the orange grove was old with at least a portion of it having been planted in the 1920s. Petitioner was not in the growing business, and he allowed the orange grove to deteriorate.After a bad freeze in 1985, petitioner let the orange grove go for a year without spraying it (without putting any herbicide or fertilizer on the trees). Petitioner replaced a considerable number of old trees and dead trees with 690 new trees. The orange*368  grove had an irrigation system which needed repairs, and the orange grove required fertilizer and herbicide treatment. Petitioner paid $ 10,000 on June 22, 1987, and $ 6,371.53 on June 1, 1988, to Irrigation Engineers for certain irrigation work done on petitioner's orange grove. Petitioner did not maintain any books or records for the orange grove, except for his checkbook. Petitioner has never made a profit from selling oranges.Petitioner also owned cattle during the tax years at issue. Petitioner was advised by Michael Partin, a rancher, that the cattle business could be profitable. 67 Petitioner purchased a herd of purebred Brahman cattle from Mr. Partin in or about 1982 or 1983. Most of the cattle were midage to older-age cattle, and a few were 1-2 year-old heifers. Petitioner joined the American Brahman Beef Association and registered a brand.*369  In 1989, petitioner returned the cattle back to Mr. Partin. The market for cattle at this time was not good. When Mr. Partin took the cattle back in 1989, the cattle were in good condition. Mr. Partin sold the cattle off over time.Petitioner owned approximately 25 Ferrari automobiles in 1985 to 1988. He did not sell any of the Ferraris in 1985 through 1988. The Ferraris were damaged by vandals, and petitioner went to a dealer to get the damages repaired. Petitioner also had alternators replaced, carburetors cleaned out, and timing belts changed, etc. Petitioner was a member of the Ferrari Club of America.Petitioner did not maintain separate bank accounts for the orange grove, the cattle, or the Ferraris. Petitioner did not report any business activities relating to the orange grove, the cattle, or the Ferraris on any income tax returns for the relevant tax years. To the extent petitioner did report any expenses with respect to those activities, he reported them on the Schedules C for his real estate business.                OPINIONPetitioner claims that he is entitled to deductions for 1985 through 1988, which relate to expenses incurred with*370  respect to his orange grove, his cattle, and his collection of Ferrari automobiles. 68 Respondent argues that petitioner was not engaged in a trade or business with respect to those activities and that petitioner has failed to substantiate the expenses he claims.*371 It is well established that "' an income tax deduction is a matter of legislative grace and that the burden of clearly showing the right to the claimed deduction is on the taxpayer.'"  INDOPCO, Inc. v. Commissioner, 503 U.S. 79">503 U.S. 79, 84, 117 L. Ed. 2d 226">117 L. Ed. 2d 226, 112 S. Ct. 1039">112 S. Ct. 1039 (1992) (quoting  Interstate Transit Lines v. Commissioner, 319 U.S. 590">319 U.S. 590, 593, 87 L. Ed. 1607">87 L. Ed. 1607, 63 S. Ct. 1279">63 S. Ct. 1279, 1 C.B. 1016">1943-1 C.B. 1016 (1943)). It is also the taxpayer's burden to show that the particular expense is currently deductible and is not a capital expenditure which is amortized or depreciated over time. See  id. at 83-84.Section 162(a)allows as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business. Conversely, section 262(a) disallows any deduction, except as otherwise expressly provided in the Code, for personal, living, or family expenses. And, section 263(a) disallows a current deduction for any capital expenditure; i. e., an amount paid out for new buildings or for permanent improvements or betterments made to increase the value of any property or estate. See id. To qualify for a deduction under section 162(a), an item must: (1) *372  Be paid or incurred during the taxable year, (2) be for carrying on any trade or business, (3) be an expense, (4) be a necessary expense, and (5) be an ordinary expense.  Commissioner v. Lincoln Sav. & Loan Association, 403 U.S. 345">403 U.S. 345, 352, 29 L. Ed. 2d 519">29 L. Ed. 2d 519, 91 S. Ct. 1893">91 S. Ct. 1893 (1971). We are primarily concerned here with the second requirement; i. e., whether petitioner incurred the expenses while carrying on a trade or business."[T]o be engaged in a trade or business, the taxpayer must be involved in the activity with continuity and regularity and that the taxpayer's primary purpose for engaging in the activity must be for income or profit. A sporadic activity, a hobby, or an amusement diversion does not qualify."  Commissioner v. Groetzinger, 480 U.S. 23">480 U.S. 23, 35, 94 L. Ed. 2d 25">94 L. Ed. 2d 25, 107 S. Ct. 980">107 S. Ct. 980 (1987). The taxpayer's expectation of profit need not be reasonable; however, a good faith expectation of profit is required.  Burger v. Commissioner, 809 F.2d 355">809 F.2d 355, 358 (7th Cir. 1987), affg. T.C. Memo. 1985-523; *373  Golanty v. Commissioner, 72 T.C. 411">72 T.C. 411, 425-426 (1979), affd. without published opinion 647 F.2d 170">647 F.2d 170 (9th Cir. 1981). All the facts and circumstances must be considered, and more weight is given to objective facts than to the taxpayer's statement of his intent.  Engdahl v. Commissioner, 72 T.C. 659">72 T.C. 659, 666 (1979).In determining whether petitioner possessed the requisite profit motive under section 162(a), we look to the factors set forth in section 183.  Osteen v. Commissioner, 62 F.3d 356">62 F.3d 356, 358 (11th Cir. 1995), affg. in part and revg. in part T.C. Memo 1993-519">T.C. Memo. 1993-519. The regulations promulgated under section 183, section 1.183-2(b), Income Tax Regs., set forth a nonexclusive list of factors, which include: (1) The manner in which the taxpayer carried on the activity; (2) the expertise of the taxpayer or his advisers; (3) the time and effort expended by the taxpayer in carrying on the activity; (4) the expectation that assets used in the activity may appreciate in value; (5) the success of the taxpayer in carrying on similar or dissimilar activities; (6) the taxpayer's history of income or losses with respect to the activity; *374  (7) the amount of occasional profits, if any, which are earned; (8) the financial status of the taxpayer; and (9) the presence of elements of personal pleasure or recreation. See  Nichols v. Commissioner, T.C. Memo. 1990-546. None of these factors alone is necessarily controlling, nor is any mathematical preponderance of factors determinative.  Osteen v. Commissioner, supra at 358. Petitioner bears the burden of proving the requisite profit motive.  Allen v. Commissioner, 72 T.C. 28">72 T.C. 28, 34 (1979).During the tax years at issue petitioner did not realize a profit on the orange grove, and he did not receive any income attributable to that activity. 69 At trial, petitioner did not know how many crates of oranges he produced from the orange grove during the years at issue, and he could only testify that it "seems like '87, I sold a few oranges." Petitioner did not know how much fruit he had picked. Petitioner also testified:*375    Q Did you do it hoping you would make money eventually?   A Oh, yes. And I eventually will. I've been hit a couple of hard   times by the freeze. And, particularly, the time that we have in   question, the irrigation system was a mess and I had to bring in   Mrs. Ray's husband and they came in and straightened it out.   There was a problem with the pump. I had to replace the pump   just to get it up and going.     But, unfortunately, what happens though, is I kind of get   it up and going and either a freeze came along, like in '85, and   just about killing everything. That set me back for a couple   years.On the basis of petitioner's testimony, we cannot agree that petitioner incurred his expenses while carrying on a trade or business. At best, petitioner in 1985-1988 had an aspiration that one day the orange grove would be capable of producing fruit and that the fruit could be sold as part of an ongoing trade or business. 70 Indeed, from petitioner's testimony, it is clear that his aspirations have not changed at the time of the trial in this case, some 13 years later.*376 The fact that an activity has recreational aspects is an important factor in determining whether petitioner has the requisite profit motivation. See  Nichols v. Comm'r, supra; sec. 1.183-2(b)(9), Income Tax Regs. Although cattle, unlike horses, and an orange grove are not activities which one might think of as providing the type of personal pleasure or gratification that might supplant a profit motivation, see  Allen v. Commissioner, supra at 36, at trial, petitioner testified:     The grove really went downhill. I bought it and I'm not in   the growing business -- I was out there chasing cows -- and   gradually I figured out, similar to the cow situation, you can't   afford to be in the cow business unless you own the land. And I   owned a large piece of land that I was already buying and talked   to Mike Partin and he said if you can't make enough out of the   cows to pay for the land -- but cows can be a good investment   and I enjoy the animals. Same way with the orange grove. I was setting there   with the orange grove, paying for my house anyway, and so it was   suggested to*377  me, Why are you letting the grove go to hell. And   so then I started fixing it up which -- probably, very little   fruit came off in the beginning because, like I say, I wasn't   paying any attention to it. I just thought, well, gee, nobody   makes money off groves, but if you already own the grove and you   can buy a tractor and buy a sprayer and stuff like this -- I   always bought used equipment, and you can see in all the repair   things, I had to fix up old tractors and discs and sprayers and   stuff -- [Emphasis added.]Mr. Partin also testified that, prior to petitioner's purchase of the cattle; "He loved the cattle. He'd come -- he'd be at my place off and on, and you know, he just loved the cattle. And we thought, you know, with his love of the cattle, that's what it takes to be in the cattle business." And, certainly, it is beyond doubt that the Ferrari automobile has an inherent pleasure quality, and petitioner has not presented any evidence to suggest otherwise. Elements of personal pleasure do not alone negate a profit motivation, see *378  Burger v. Commissioner, supra at 360;  McCarthy v. Commissioner, T.C. Memo. 2000-135; however, on the record before us we find considerable evidence that the activities were engaged in for hobby and as a personal diversion.Petitioner did not maintain any books or records for any of these purported businesses, and his only method of bookkeeping with respect to the orange grove and cattle business was his "checkbook". The lack of a bookkeeping system such that the taxpayer could not monitor expenses or losses and could not make informed business decisions is persuasive evidence that the business activity was not engaged in for profit.  Burger v. Commissioner, 809 F.2d at 359. Further, with respect to the cattle and the orange grove, the record and petitioner's testimony show that he had a very primitive expertise in those activities. For example, even though petitioner noted the importance of the age of cattle as an "economic factor" in their "economic production", he could not testify from personal knowledge regarding the age of the cattle he acquired from Mr. Partin. This indicates to us a lack of a bona fide profit motivation.*379  Petitioner did not provide evidence of the amount of time that he devoted to the particular activities during the tax years at issue, or any evidence that he was required to withdraw from his real estate business to devote more time to any of those activities. See  McCarthy v. Comm'r, supra; sec. 1.183-2(b)(3), Income Tax Regs. On the record before us, we find that petitioner was not engaged in a trade or business with respect to the orange grove, cattle, and Ferrari activities.Taxpayers must substantiate any expenses which they claim as deductions. See  Hradesky v. Commissioner, 65 T.C. 87">65 T.C. 87, 89-90 (1975), affd. 540 F.2d 821">540 F.2d 821 (5th Cir. 1976);  Tarakci v. Commissioner, T.C. Memo. 2000-358. 71 Further, to be an "ordinary" expense under section 162, the expense must arise from a transaction that is "of common or frequent occurrence in the type of business involved."  Deputy v. du Pont, 308 U.S. 488">308 U.S. 488, 495, 84 L. Ed. 416">84 L. Ed. 416, 60 S. Ct. 363">60 S. Ct. 363, 1 C.B. 118">1940-1 C.B. 118 (1940);  Tarakski v. Comm'r, supra.*380  There is no dispute in this case that petitioner was engaged in orange grove, cattle, and Ferrari activities. There is also no dispute, we think, that those activities are such that expenses arise in their normal course. 72 As petitioner states with respect to his cattle, "he's got to eat". However, to substantiate his expenses for those activities, petitioner has simply provided a bundle of receipts and a listing of expenses. Most of those receipts and the listing do not show for what purpose the expenses were made. Those items do not foreclose that the expenses incurred were personal expenses unrelated to the activities that petitioner claims deductions for or that the expenses are such that they are required to be capitalized. Petitioner has not provided further substantiation of those items, and he has not provided evidence which would permit us to conclude that those particular expenses were of frequent and common occurrence in the petitioner's purported business activity. With that being said, petitioner has not met his burden of substantiation or proved his entitlement to current deductions under section 162(a). We hold that the claimed expenses are not allowable as ordinary*381  and necessary business deductions.G. Self-employment Tax             FINDINGS OF FACTPetitioner reported self-employment tax of $ 930, $ 509, $ 5,387, and $ 2,371, on his Forms 1040 for 1985, 1986, 1987, and 1988, respectively. Those amounts were computed on the basis of petitioner's net profits, which he reported from his real estate business: Net profits of $ 7,882, $ 4,138, $ 44,219, and $ 18,208, for 1985, 1986, 1987, and 1988, respectively.                OPINIONSection 1401imposes a percentage tax on self-employment income of every individual. See *382  Baker v. Comm'r, T.C. Memo 2001-283">T.C. Memo 2001-283. Self-employment income is defined as "the net earnings from self-employment derived by an individual * * * during any taxable year". Sec. 1402(b). The term "net earnings from self-employment" is defined as "the gross income derived by an individual from any trade or business carried on by such individual, less the deductions * * * which are attributable to such trade or business". Sec. 1402(a).Respondent determined self-employment taxes on the basis of petitioner's income from his real estate business. The applicable percentage for each of the tax years at issue was applied to the maximum amount of self-employment earnings subject to self-employment tax: $ 39,600 in 1985, $ 42,000 in 1986, $ 43,800 in 1987, and $ 45,000 in 1988. See sec. 1402(b)(1). Respondent determined petitioner's self-employment tax liability to be $ 4,673 73 for 1985, $ 5,166 74 for 1986, $ 5,387 75 for 1987, and $ 5,859 76 for 1988.*383 Petitioner was engaged in the trade or business of buying and selling real estate during the years at issue. He does not contest on brief that his earnings from that business are subject to self-employment taxes. Therefore, we sustain respondent's determination regarding the application*384  of the self-employment tax to petitioner's net earnings and the amounts he determined.II. Additions to Tax for FraudRespondent determined additions to tax under section 6653(b) for petitioner's 1985, 1986, 1987, and 1988 tax years. Section 6653(b), in effect for the tax years at issue, provided for additions to tax for underpayments of tax which are attributable to fraud. Section 6653(b)(1) and (2), in effect for petitioner's 1985 tax year provided:  SEC. 6653(b). Fraud. --     (1) In general. -- If any part of any underpayment * * * of   tax required to be shown on a return is due to fraud, there   shall be added to the tax an amount equal to 50 percent of the   underpayment.     (2) Additional amount for portion attributable to fraud. --   There shall be added to the tax (in addition to the amount   determined under paragraph (1)) an amount equal to 50 percent of   the interest payable under section 6601 --        (A) with respect to the portion of the underpayment     described in paragraph (1) which is attributable to fraud,     and     *385     (B) for the period beginning on the last day     prescribed by law for payment of such underpayment     (determined without regard to any extension) and ending on     the date of the assessment of the tax (or, if earlier, the     date of the payment of the tax). Section 6653(b)(1) and     (2), in effect for 1986 and 1987, provided:SEC. 6653(b). Fraud. --     (1) In general. -- If any part of any underpayment * * * of   tax required to be shown on a return is due to fraud, there   shall be added to the tax an amount equal to the sum of --        (A) 75 percent of the portion of the underpayment     which is attributable to fraud, and        (B) an amount equal to 50 percent of the interest     payable under section 6601 with respect to such portion for     the period beginning on the last day prescribed by law for     payment of such underpayment (determined without regard to     any extension) and ending on the date of the assessment of     the tax or, if earlier, the date of the*386  payment of the tax.     (2) Determination of portion attributable to fraud. -- If   the Secretary establishes that any portion of an underpayment is   attributable to fraud, the entire underpayment shall be treated   as attributable to fraud, except with respect to any portion of   the underpayment which the taxpayer established is not   attributable to fraud.Section 6653(b)(1) and (2) , in effect for 1988, provided:SEC. 6653(b). Fraud. --     (1) In general. -- If any part of any underpayment * * * of   tax required to be shown on a return is due to fraud, there   shall be added to the tax an amount equal to 75 percent of the   portion of the underpayment which is attributable to fraud.     (2) Determination of portion attributable to fraud. -- If   the Secretary establishes that any portion of an underpayment is   attributable to fraud, the entire underpayment shall be treated   as attributable to fraud, except with respect to any portion of   the underpayment which the taxpayer established is not   attributable to fraud.*387 Respondent has the burden of proof, sec. 7454(a); Rule 142(b), and he must show by clear and convincing evidence: (1) Petitioner has underpaid his taxes for each year, and (2) at least some part of the underpayment is due to fraud.  DiLeo v. Commissioner, 96 T.C. at 873; Hebrank v. Comm'r, 81 T.C. 640">81 T.C. 640, 642 (1983).With respect to the 1985 tax year, the 50-percent addition to tax for fraud under section 6653(b)(1) is imposed on the total underpayment, where any portion of the underpayment is attributable to fraud. See H. Conf. Rept. 99-841 at II-780  (1986), 4 C.B. 1">1986-4 C.B. 1,780. With respect to the section 6653(b)(2) addition to tax for 1985, it is respondent's burden to establish, by clear and convincing evidence, the specific portion of the underpayment attributable to fraud.  Hughes v. Commissioner, T.C. Memo 1994-139">T.C. Memo. 1994-139.With respect to the 1986, 1987, and 1988 tax years, once respondent has shown by clear and convincing evidence an underpayment of tax and that at least some portion of the underpayment is attributable to fraud, the entire underpayment is treated as attributable to fraud and subject to the section 6653(b)(1)*388  addition to tax. Sec. 6653(b)(2);  Kalo v. Commissioner, T.C. Memo. 1996-482, affd. without published opinion 149 F.3d 1183">149 F.3d 1183 (6th Cir. 1998).The normal presumption of correctness then attaches to the Commissioner's determination,  DiLeo v. Commissioner, supra at 873, and the taxpayer bears the burden of showing how much of the underpayment is not due to fraud.  Ishler v. Comm'r, T.C. Memo 2002-79">T.C. Memo. 2002-79. 77   A. Underpayment of Tax Required To Be Shown on a   Return 78Under section 6653(c)(1), in effect for each of the tax years at issue, an "underpayment" is defined as follows:*389   SEC. 6653(c). Definition of Underpayment. -- For purposes of   this section, the term "underpayment" means --     (1) Income, estate, gift, and certain excise taxes. -- In     the case of a tax to which section 6211 (relating to     income, estate, gift, and certain excise taxes) is     applicable, a deficiency as defined in that section (except     that, for this purpose, the tax shown on a return referred     to in section 6211(a)(1)(A) shall be taken into account     only if such return was filed on or before the last day     prescribed for the filing of such return, determined with     regard to any extension of time for such filing) * * *The Commissioner cannot rely upon the taxpayer's failure to meet the burden of proof on the issue of the existence of a deficiency to sustain his burden of proving an underpayment by clear and convincing evidence.  Parks v. Commissioner, 94 T.C. at 660-661; *390  Otsuki v. Commissioner, 53 T.C. 96">53 T.C. 96, 106 (1969). 79 However, the Commissioner need only show that there is "some underpayment" for each of the tax years at issue.  Langworthy v. Commissioner, T.C. Memo 1998-218">T.C. Memo. 1998-218.Since petitioner's returns for 1985, 1986, and 1988 were not filed timely, respondent computed the fraud penalty on the basis of petitioner's total tax liability for each year without reduction for amounts shown on petitioner's untimely returns. See sec. 6653(c)(1) (parenthetical). On the record before us, we hold that respondent has met his burden of proving by clear and convincing evidence an underpayment for each of the tax years 1985, 1986, 1987, and 1988.1. Underpayment for 1985For 1985, petitioner has specifically conceded the following amounts as income, see appendix C:       Income item         Amount *391        ___________         ______   Schedule C miscellaneous income   $ 12,357   Gains from property sales       185,661   Schedule C interest income       40,479   Commission income           30,249   Unidentified deposits          1,700                     _______    Total               270,446In addition, petitioner did not address on brief the following items of income:       Income item             Amount       ___________             ______Gain from sale of Lot 1 in  Susan's Lakefront Estate           $ 20,097Installment gain from sale of 3 lots  in Florida Fruit Belt Subdivision        28,347Installment gain from Silver Lake sale       6,144Gain from sale of Wax Myrtle trees          400Interest income from Silver Lake mortgage      6,773Commission income                 37,500   Rental*392  income                 1,250                        _______    Total                   100,511Those items are conceded by petitioner's own statement on brief that "any issues not raised in Petitioner's Brief are also conceded by Petitioner". 80 Respondent has produced affirmative evidence for each of the items conceded, and he has proven those items of income by clear and convincing evidence.Respondent's determination that petitioner realized $ 30,925 in 1985 from the sale of an installment obligation to his father is supported by clear and convincing evidence in the record: (1) An assignment of mortgage relates that the mortgage along with the "note or obligation" and "the*393  moneys due and to become due thereon" were being transferred "in consideration of the sum of" $ 36,000 received from Charles Medlin; (2) the form of the transaction was a sale of an installment note, which is evidenced by petitioner's instructions to the mortgagor to make direct payments to his father.Respondent also relies on his determination that petitioner realized 100 percent of the gain realized on the sale of Lot 23 in the High Plains Property in 1985. The record is clear that, at one point in time, petitioner and Mr. Schoolfield were 50-50 owners of the High Plains Property. However, it is not clear from the record whether this 50-50 interest extended to Lot 23, and, if so, whether petitioner and Mr. Schoolfield split up before or after the sale in 1985. In our general discussion relating to the deficiency determination, we have relied on petitioner's failure to overcome the presumption of correctness which attaches to respondent's determination. See supra. We decided that petitioner did not establish that Mr. Schoolfield owned 50 percent of that lot at the time of its sale, and we decided that petitioner was responsible for 100 percent of the gain realized. However, with*394  respect to the fraud addition to tax, we find that respondent has not proven by clear and convincing evidence that petitioner was responsible for 100 percent of the gain from this sale. Petitioner agrees on brief that he is responsible for half of the gain from this sale.There is clear and convincing evidence that the fair market value of the Citrus County Property at the time of the foreclosure sale in 1985 was at least $ 87,000 and that petitioner realized $ 85,156 81 on the foreclosure sale in 1985. Respondent determined that the deposit of a $ 59,000 cashier's check into petitioner's Tucker bank account on March 12, 1985, was income to petitioner. Bank deposits are prima facie evidence of income.  United States v. Price, 335 F.2d at 677;  DiLeo v. Commissioner, 96 T.C. at 868. Where respondent bears the burden of proof, he must show a likely taxable source for the deposits. *395  Armes v. Commissioner, 448 F.2d 972">448 F.2d 972, 975 (5th Cir. 1971), affg. in part, revg. in part, and remanding T.C. Memo. 1969- 181. Alternatively, where the taxpayer alleges a nontaxable source, the Commissioner may satisfy his burden by disproving the nontaxable source so alleged.  United States v. Massei, 355 U.S. 595">355 U.S. 595, 2 L. Ed. 2d 517">2 L. Ed. 2d 517, 78 S. Ct. 495">78 S. Ct. 495 (1958);  Parks v. Commissioner, 94 T.C. at 661. Respondent claims that the Tucker bank account is an account to which petitioner deposited, generally, taxable income from his business. Also, respondent relies upon petitioner's "business of buying and selling real estate and real estate development" as the likely source of the $ 59,000 deposit.The record shows that there were a number of deposits into petitioner's Tucker bank account from his real estate business and that those deposits represented taxable income. Indeed, the spreadsheets provided to Mr. Kelly, which list deposits to and expenditures from the Tucker bank account, show items such as commissions and interest received in petitioner's real estate business. Respondent has shown by clear and convincing evidence the likely source of the $ 59,000; *396  i.e., petitioner's real estate business. Petitioner was regularly engaged in the real estate business during 1985, and he received a substantial amount of unreported income during that period from that business. 82 Petitioner did not maintain adequate records for his real estate transactions or development activities, and there is substantial evidence of an intent to conceal income received in that business. Given those circumstances, we find that the real estate business provides a likely source for the $ 59,000 cashier's check.Petitioner argues, on the other hand, that the $ 59,000 cashier's check is traceable to a $ 70,000 check*397  from Washington International, and that check represents a loan. Petitioner contends that respondent has not proven this source to be a taxable source and that, indeed, he was aware of this $ 70,000 check during the examination, but he did not classify it as income. First, we note that respondent, having shown a likely taxable source for the $ 59,000 deposit, does not bear the burden of negating nontaxable sources alleged by petitioner.  Holland v. United States, 348 U.S. 121">348 U.S. 121, 99 L. Ed. 150">99 L. Ed. 150, 75 S. Ct. 127">75 S. Ct. 127, 2 C.B. 215">1954-2 C.B. 215 (1954). Second, we find that respondent has nevertheless negated the Washington International check as a nontaxable source of the deposit. Petitioner, in this case, relies upon Mr. Kelly's testimony that Washington International, generally, "loaned money secured by real estate" and that petitioner's account was "basically a loan account". However, this position is inconsistent with petitioner's testimony at trial that the Washington International trust account was used as a vehicle for deferring income from real estate sales. We cannot agree, on the basis of the record before us, that the Washington International trust account was a loan account or that the $ 70,000 check*398  represents a loan. There is evidence that this check did not represent a nontaxable source, and we do not draw any adverse conclusion from respondent's failure to classify it as taxable income in his examination. We hold that respondent has shown by clear and convincing evidence that the $ 59,000 deposit represents income to petitioner.Respondent has proven by clear and convincing evidence the following items of income for 1985:            Item              Amount            ____              ______Income conceded or stipulated            $ 270,446Disputed income conceded on brief           100,511Gain from sale of installment obligation        30,925One-half gain from sale of High Plains Property     9,850Gain from foreclosure of Citrus County Prop.      85,156Unidentified deposit -- Mar. 12, 1985         59,000                          ________  Total                       555,888Respondent allowed*399  the following deductions for 1985:Type of deduction        Amount_________________       ________Schedule C expenses      $ 225,301Itemized deductions       22,567Exemptions            2,080  Total            249,948Respondent has proven by clear and convincing evidence that petitioner received taxable income of $ 305,940 83 in 1985. Respondent has also proven that petitioner is liable for self- employment taxes of $ 4,673 for 1985. Respondent has proven an underpayment for 1985 by clear and convincing evidence.2. Underpayment for 1986For 1986, petitioner has specifically conceded the following amounts as income; see appendix C:       Income item         Amount       ___________         ______   Schedule C miscellaneous*400  income   $ 27,019   Gains from property sales      154,924   Schedule C interest income      10,614   Schedule C commission income     32,357   Schedule C unidentified deposit    24,186                    _______    Total               249,100In addition, petitioner did not address on brief the following items of income:       Income item           Amount       ___________           ______Gain from sale of Tract A in  Susan's Lakefront Estate         $ 21,097Installment gain from Silver Lake sale     12,288Interest from Silver Lake            5,805Deposit on May 6, 1986              300Deposit on Oct. 10, 1986             300                      ________  Total                   39,790Petitioner has conceded those items. Respondent has produced affirmative evidence for each of the items conceded, *401  and he has proven those items of income by clear and convincing evidence.Respondent relies upon the gain from the sale of one of the Grissom Parcels in 1986 as evidence of an underpayment. Petitioner agrees that he is responsible for $ 12,042 of gain from that sale. Respondent has proven that amount by clear and convincing evidence.Respondent also relies on the gain from the exchange of petitioner's ownership interest in Lots 26, 27, and 28 of the Arrowhead Lakes Subdivision for Mr. McLaughlin's ownership interest in the Angel-Royse Property. In our discussion relating to whether a deficiency existed with respect to this item, the record reflected that petitioner was the 100-percent owner of the lots in the Arrowhead Lakes Subdivision and that he exchanged those lots for Mr. McLaughlin's 50-percent interest in the Angel-Royse Property. There is clear and convincing evidence that petitioner and Mr. McLaughlin were not involved in a partnership with respect to both the Arrowhead Lakes Subdivision and the Angel-Royse Property. We hold that respondent has proven by clear and convincing evidence that petitioner realized $ 60,709 of gain from the exchange of the properties in 1986. *402  Respondent also relies upon the gain of $ 92,502 from the sales of 31 and 31.5 acres of East Lake Vista in 1986. There is clear and convincing evidence that petitioner owned at least a 50-percent interest in the East Lake Vista properties at the time of their sales in 1986, including petitioner's financial statements, a guaranty that petitioner entered into with the buyer at the time of the sale of the 31.5 acres, and the ledger cards that Mr. Miles's law firm maintained with respect to East Lake Vista. We hold that respondent has proven by clear and convincing evidence that petitioner realized half of the gain from the sales of 31 and 31.5 acres from East Lake Vista in 1986.Respondent has proven by clear and convincing evidence the following items of income for 1986:            Item           Amount            ____           ______Income conceded or stipulated        $ 249,100Disputed income conceded on brief        39,790Gain from sale of Grissom Parcels        12,042Gain from exchange of Arrowhead Lakes  Subdivision lots         *403        60,706Gain from sales in East Lake Vista       92,502                       _______  Total                    454,140Respondent allowed the following deductions for 1986:Type of deduction          Amount_________________          ______Schedule C expenses        $ 298,656Nonitemized contributions         48Exemptions               2,160                  _______  Total               300,864Respondent has proven by clear and convincing evidence that petitioner received taxable income of $ 153,276 84 in 1986. Respondent has also proven that petitioner is liable for self- employment taxes of $ 5,166 for 1986. Respondent has proven an underpayment for 1986 by clear and convincing evidence. *404  3. Underpayment for 1987For 1987, petitioner has specifically conceded the following amounts as income; see appendix C:       Income item          Amount       ___________          ______   Schedule C miscellaneous income    $ 24,000   Gains from property sales       946,649   Schedule C interest income        9,084                     _______    Total                979,733In addition, petitioner did not address on brief the following items of income:       Income item         Amount       ___________         ______   Gain from sale of Silver Lake   $ 24,577   Interest income            5,488                    _______    Total               30,065Petitioner has conceded those items. Respondent has produced affirmative evidence for each of the items conceded, and he has proven those items of income by clear and convincing*405  evidence. Thus, respondent has proven by clear and convincing evidence that petitioner received income of $ 1,009,798 ($ 979,733 + $ 30,065) in 1987.Respondent allowed the following deductions for 1987:  Type of deduction         Amount  _________________         ______  Schedule C expenses      $ 265,076  Itemized deductions       43,561  Exemptions            3,800                ________   Total            312,437Respondent has proven by clear and convincing evidence that petitioner received taxable income of $ 697,361 85 in 1987. Respondent has proven by clear and convincing evidence that petitioner is liable for self-employment tax of $ 5,387. Petitioner reported taxable income of $ 37,879, a tax of $ 7,515 on that amount, and self-employment tax of $ 5,387. Respondent has proven an underpayment for 1987 by clear and convincing evidence.*406  4. Underpayment for 1988For 1988, petitioner has specifically conceded the following amounts as income; see appendix C:       Income item           Amount       ____________           ______   Schedule C miscellaneous income     $ 12,000   Gains from property sales        167,120   Unidentified deposits           4,400                      _______    Total                 183,520In addition, petitioner did not dispute on brief the following items of income:       Income item           Amount       ___________           ______Gain from sale of Lots 6-30 in   Susan's Lakefront Estate        $ 77,298Gain from sale of Mefford property       55,164Rents received from Island Living, Inc.    12,000                      ________  Total                   144,462Petitioner has conceded*407  those items. Respondent has produced affirmative evidence for each of the items conceded, and he has proven those items of income by clear and convincing evidence.Respondent relies on the sale of 10 acres in East Lake Vista as evidence of an underpayment for 1988. Considering our discussion above with respect to the sales of acres from East Lake Vista in 1986, we hold that respondent has proven by clear and convincing evidence that petitioner owned a 50-percent interest in East Lake Vista at the time of the sale in 1988 and that he realized gain of $ 19,522 in 1988 from the sale of his 50-percent interest.Respondent also relies on the $ 140,000 that was deposited into Mr. Miles's law firm's trust account for petitioner on July 8, 1988. Petitioner established that the $ 140,000 was traceable to a $ 140,000 check from Dean Witter and that the check stub was signed "RECD BY Richard Margolis". Respondent has demonstrated by clear and convincing evidence that petitioner was involved in the business of buying and selling real estate; he received substantial amounts of income from numerous property transactions in this business; those property transactions were carried out using trustees, *408  including Mr. Miles; proceeds from those transactions were deposited into Mr. Miles's law firm's trust account; and those proceeds represented income taxable to petitioner but which he failed to report. By petitioner's own account, the $ 140,000 check from Dean Witter and allegedly from Mr. Margolis was attributable to a transaction which was in form a sale of petitioner's property. We hold that respondent has established that petitioner's business of buying and selling real estate was a likely taxable source of this deposit.Petitioner alleges that the source of the deposit of $ 140,000 was a loan from Mr. Margolis. Petitioner did not call Mr. Margolis as a witness, and he did not provide any documentary evidence to support his claim that this amount was a loan. Petitioner's claim that this item represents a loan is based solely on his testimony, which was uncorroborated, inconsistent, and not credible. Given these circumstances, petitioner's use of Mr. Miles's law firm's trust account to transact his real estate deals, the substantial evidence of concealment of petitioner's real estate sales and gains therefrom, and the form of the transaction that petitioner relies upon as a source*409  of nontaxable income, we are convinced that the $ 140,000 was not a loan.Respondent has proven by clear and convincing evidence the following items of income for 1988:       Item               Amount       ____               ______Income conceded or stipulated        $ 183,520Disputed income conceded on brief       144,462Sale of 10 acres from East Lake Vista     19,522Deposit of $ 140,000 on July 8, 1988      140,000                      ________  Total                   487,504Respondent allowed the following deductions for 1988:     Type of deduction          Amount     _________________          ______Schedule C expenses             $ 301,910Itemized deductions              44,651Exemptions                   3,900                      ________Total          *410            350,461Respondent has proven by clear and convincing evidence that petitioner received taxable income of $ 137,043 86 in 1988. Respondent has also proven that petitioner is liable for self- employment taxes of $ 5,859 for 1988. Respondent has proven an underpayment for 1988 by clear and convincing evidence. 5. ConclusionRespondent has proven underpayments by clear and convincing evidence for 1985, 1986, 1987, and 1988.B. Fraudulent Intent1. Clear and Convincing Evidence of FraudRespondent must show that a portion of the underpayment is attributable to fraud. Fraud is established where the Commissioner shows that "the taxpayer intended to evade taxes that he knew or believed to be owing by conduct intended to conceal, mislead or otherwise prevent the collection of such taxes." *411  Korecky v. Commissioner, 781 F.2d 1566">781 F.2d 1566, 1568 (11th Cir. 1986), affg. T.C. Memo 1985-63">T.C. Memo. 1985-63; see also Webb v. Commissioner, 394 F.2d 366">394 F.2d 366, 377 (5th Cir. 1968), affg. T.C. Memo 1966-81">T.C. Memo. 1966-81;  Rowlee v. Commissioner, 80 T.C. 1111">80 T.C. 1111, 1123 (1983);  Clark v. Comm'r, T.C. Memo 2001-205">T.C. Memo. 2001-205. Suspicion of fraudulent conduct is not sufficient.  King's Court Mobile Home Park, Inc. v. Commissioner, 98 T.C. 511">98 T.C. 511, 517 (1992). The issue of fraudulent intent is a question of fact shown by surveying the taxpayer's entire course of conduct and drawing reasonable inferences therefrom.  Korecky v. Commissioner, supra at 1568.Fraud is rarely provable by direct evidence but may be provable by circumstantial evidence.  Brooks v. Comm'r, 82 T.C. 413">82 T.C. 413, 431 (1984), affd. without published opinion 772 F.2d 910">772 F.2d 910 (9th Cir. 1985). Such evidence includes, but is not limited to the following "badges of fraud": (1) Understating income, (2) maintaining inadequate records, (3) failing to file tax returns, (4) giving implausible or inconsistent explanations of behavior, (5) concealing income or assets, *412  (6) failing to cooperate with tax authorities, (7) engaging in illegal activities, (8) an intent to mislead which may be inferred from a pattern of conduct, (9) lack of credibility of the taxpayer's testimony, (10) filing false documents, and (11) dealing in cash. See  Bradford v. Commissioner, 796 F.2d 303">796 F.2d 303, 307 (9th Cir. 1986), affg. T.C. Memo 1984-601">T.C. Memo. 1984-601;  Recklitis v. Commissioner, 91 T.C. 874">91 T.C. 874, 910 (1988);  Kalo v. Commissioner, T.C. Memo 1996-482">T.C. Memo. 1996-482. No single factor is necessarily dispositive, but a combination of several factors is persuasive circumstantial evidence of fraud.  Petzoldt v. Commissioner, 92 T.C. at 699. We find substantial evidence of fraud in this case.The record shows a consistent pattern of understating income by petitioner. For the years in issue, petitioner received substantial amounts of income from his real estate business, which he did not report as income. Petitioner reported income only to the extent that deposits were made into his personal checking accounts and which he did not classify as "loans". However, the income that petitioner reported was substantially offset by deductions that*413  petitioner claimed for each disbursement that he made from his personal bank accounts. 87 The items of income that respondent determined, and which he proved by clear and convincing evidence, greatly exceed the amounts which petitioner reported as gross income on his returns for 1985 through 1988. We find that the understatements for the years at issue were substantial and are evidence of fraud.Petitioner has previously understated his income in considerable amounts and with respect to items of income substantially similar to those items involved herein. 88 On April 17, 1988, we entered a stipulated decision for deficiencies of $ 1,082 for 1977, $ 22,213 for 1978, $ 63,533 for 1979, $ 7,110 for 1981, and $ 37,921 for 1982. Petitioner also*414  understated his income for the 1983 and 1984 tax years, and he eventually agreed to deficiencies of $ 10,550 for those years. We find the stipulated decision constitutes substantial evidence of fraud for the years at issue in the instant case since: (1) The decision involved similar items as those involved herein; i.e., the use of nominee accounts to hold real estate sale proceeds; and (2) it was entered before petitioner's filing of each of his returns for the 1985 through 1988 tax years. Further, in the course of the previous years' examinations, petitioner was apprised that the use of trustees to hold real estate sale proceeds did not insulate him from tax liability, and he agreed that those transactions were taxable. Petitioner's consistent understatement of large amounts of such income over a period of years is evidence of willful intent to evade tax.  Otsuki v. Commissioner, 53 T.C. at 108.*415  Petitioner filed Forms 2688 for each of the years at issue in which he requested an extension of time for filing his returns. In the Form 2688 for the 1985 tax year, he states as his need for an extension: "Client derived substantially all his income from a bulk land transaction, which was extremely complex. Additional time is needed to analyze the transaction." Petitioner did not report income on his Form 1040 for 1985 from any bulk land transaction, and he accepts on brief that he did not provide any information to Mr. Kelly regarding any bulk land sale transaction. We find his statement on the Form 2688, which essentially admits having received income from a land sale, as substantial evidence that petitioner knew he was taxable for such a transaction before the filing of his return.In his Forms 2688 for the 1986, 1987, and 1988, tax years, petitioner requested an extension because "Taxpayer has not received all needed K-1's for 1065 & 1120 tax returns that represent a substantial portion of his income. Without these items a complete and accurate return cannot be prepared." However, petitioner never provided any Schedules K-1 to Mr. Kelly. Moreover, in the examination of his 1983*416  and 1984 Forms 1040 filed on January 30, 1986, and March 7, 1986, respectively, petitioner informed the revenue agent that he was not involved in any corporations, partnerships, or trusts, i.e., entities from which Schedules K-1 might be issued. We have found as fact that petitioner was involved in several business entities, and petitioner accepts that he owned properties held in trust by Mr. Miles and other trustees under his control. We also note that petitioner informed the revenue agent examining his 1983 and 1984 returns that his Cayman Islands trust account was closed in 1983. However, petitioner subsequently received five checks totaling $ 135,000 from the Cayman Islands trust in 1985. We find that this record of inconsistent statements and claims by petitioner is yet another indication of fraud. 89*417  Petitioner did not provide to his return preparer, Mr. Kelly, any checks or other documents relating to his real estate transactions, and he did not disclose to Mr. Kelly the existence or nature of his use of Mr. Miles's law firm's trust account. Petitioner provided to Mr. Kelly only spreadsheets reflecting his deposits into and expenditures from his bank accounts. 90Concealing evidence from one's tax return preparer is indicative of fraud.  Ishler v. Comm'r, T.C. Memo. 2002-79.Petitioner's reliance on spreadsheets of his bank deposits and disbursements to compute his income tax liability was surely misplaced, and there is considerable evidence that he knew this to be the case. Indeed, he was told during the examination of his 1983 and 1984 returns, which occurred prior to filing the returns for the years in issue, that this method of computing*418  taxable income was not acceptable. The duty of filing accurate returns cannot be avoided by placing responsibility upon an agent, especially where the taxpayer has withheld books, records, and other information regarding sources of income, see  Bacon v. Commissioner, T.C. Memo 2000-257">T.C. Memo. 2000-257, affd. without published opinion 275 F.3d 33">275 F.3d 33 (3d Cir. 2001), and where the taxpayer has taken an active and controlling role in the process of preparing the tax returns and the information used for their preparation.During the examination of petitioner's returns, respondent served a third-party recordkeeper summons on Mr. Miles and a summons on petitioner, both of which requested information for petitioner's 1985 through 1988 tax years. Petitioner did not comply with the summons issued to him, and, at petitioner's behest, Mr. Miles did not provide any requested information. Respondent was forced to pursue enforcement in court of those summonses. Petitioner's refusal to cooperate with respondent in determining his correct income tax liability is indicia of fraud. See *419  Rowlee v. Commissioner, 80 T.C. at 1125.We also consider petitioner's testimony at trial to be evidence of his fraudulent intent for the years at issue. We find that petitioner's testimony at trial was evasive and inconsistent, and we do not find it credible:   Although mere refusal to believe the taxpayer's testimony does   not discharge the Commissioner's burden, the lack of credibility   of the taxpayer's testimony, the inconsistencies in his   testimony and his evasiveness on the stand are heavily weighted   factors in considering the fraud issue." [ Toussaint v. Comm'r, 743 F.2d 309">743 F.2d 309, 312   (5th Cir. 1984), affg. T.C.Memo. 1984-25; citations omitted.]Petitioner was unable to explain credibly his failure to report the amounts of income from his real estate sales transactions.There is considerable evidence of the concealment of assets and of income for the tax years at issue, and we find that this concealment is due in large part to an intent to mislead tax authorities and to evade taxation on income. 91 For the years 1981 through 1990, petitioner had his personal residence titled in*420  the name of Mr. Miles, as trustee. 92 Also, in 1987, petitioner purchased a Ferrari and had the bill of sale and the application for a temporary tag put in the name of Mr. Miles's law firm. Petitioner regularly used Mr. Miles, Ms. Allen, and other trustees to hold and sell his various properties, and he then used Mr. Miles's law firm's trust account to hold the proceeds from the sales. The trustees had no functions other than holding title to the properties, and petitioner was firmly in control of the proceeds that passed into the law firm's trust account. Indeed, as trustee of that account, Mr. Miles did whatever petitioner instructed him to do, and petitioner requested on several occasions that Mr. Miles or Ms. Goodman pay his personal expenses with his trust funds. The use of nominee accounts; i.e., the use of bank accounts fashioned as trust accounts, to conceal assets is evidence of fraud where petitioner has unfettered control over those accounts. 93 Temple v. Commissioner, T.C. Memo 2000-337">T.C. Memo. 2000-337, affd. 62 Fed. Appx. 605">62 Fed. Appx. 605 (6th Cir. 2003); *421  Friedman v. Commissioner, T.C. Memo. 1968-145, affd. 421 F.2d 658">421 F.2d 658 (6th Cir. 1970).*422  Petitioner used fictitious names in some of his real estate dealings for the years in issue. Indeed, petitioner signed various documents relating to real estate documents in the name of "William R. Wright", and he also notarized several documents in that name. Petitioner also used the name "D. W. Davis" and opened a bank account in that name. When asked about his use of fictitious names, petitioner testified with respect to the name "John Waltin" that it was not fictitious since "there's probably a John Waltin somewhere". We find petitioner's testimony not credible, and we find that he used those fictitious names for the purpose of concealing income and property transactions. See  Milito v. Commissioner, T.C. Memo 1989-145">T.C. Memo. 1989-145("The use of aliases or fictitious names to conceal income is also evidence of fraud."); see also  Cooperstein v. Commissioner, T.C. Memo. 1984-290;  Yu v. Commissioner, T.C. Memo. 1973-188; Staff v. Commissioner, T.C. Memo. 1954- 59.As we have noted throughout this opinion, petitioner has consistently failed to maintain adequate records of his real estate and other transactions. In some cases, the only record*423  petitioner admits to have maintained is his checkbook. Clearly, a checkbook is an insufficient record for purposes of computing his gross income, especially where the transactions involved are complex real estate transactions which include installment sales and subdividing. Such a gross failure to maintain adequate records (or to provide such records) is certainly indicative of fraud. See  Clayton v. Commissioner, 102 T.C. at 647.We hold that there is clear and convincing evidence of fraudulent intent to evade income taxes by petitioner and that the circumstances which lead us to that holding were apparent with respect to at least some part of the underpayments for each of the tax years in issue. Thus, with respect to the 1985 tax year, respondent has satisfied his burden, and the addition to tax under section 6653(b)(1) applies to the entire underpayment; with respect to the 1986, 1987, and 1988, tax years respondent has satisfied his initial burden, and the additions to tax for fraud for those tax years apply to the entire underpayment unless petitioner can show the specific portion of the underpayment that is not due to fraud.2. Portion of Underpayment Not Attributable*424  to FraudPetitioner contends, generally, that he understood that, in dealings in real estate (and exotic cars), receipts from sales or mortgage payments related to the real estate business "were not taxable, but were a tax free exception", but that "Payments taken for living and personal expenses were taxable." Petitioner is correct that the fraud penalty cannot be imposed on the basis of an "honest mistake" regarding taxability. Indeed, the "due to fraud" language in section 6653(b) requires a specific intent to evade a tax owing, and "a good-faith misunderstanding of the tax laws could negate fraud".  Niedringhaus v. Commissioner, 99 T.C. 202">99 T.C. 202, 217 (1992). However, considering all the facts and circumstances on the record, we find petitioner's alleged misunderstanding of the law on tax free exchanges incredible. 94*425  Petitioner was an experienced real estate developer and dealer for many years. He was involved in a considerable number of real estate transactions during the years at issue and in prior years. Mr. Kelly testified that petitioner appeared knowledgeable on the subject of like-kind exchanges. See sec. 1031;  Kalo v. Commissioner, T.C. Memo. 1996-482 (A taxpayer's intelligence, education, and tax expertise are also relevant for purposes of determining fraudulent intent).At trial, petitioner testified:   Q Now, in relation to mortgage payments -- the receipt of   mortgage payments -- if those payments went to Mr. Miles as   trustee, you related how they might not -- might or might not   have appeared on your tax return.   A Yes, sir.   Q Would you explain to the Court why they might or might not   appear on your tax return if a payment went to Miles?   A Well, I mean, we were discussing before that as long as I was   leaving in there to either pay -- I mean, some of it went for   legal fees or taxes -- real estate taxes, mortgage payments,   interest payments, to purchase another piece of*426  property that --   and occasionally I would go, you know, need money and say, Write   me a check. I would put it in my account, go on the spreadsheet;   it would go on the return.   Q Now, as far as payments that were received from the sale of a   property, if that went to Miles, how would you consider it? How   did you consider it?   A I'm sorry. I thought that was the question you had just   previously asked me.   Q No, I asked you specifically about receipt from mortgage   payments -- if there was a mortgage payment that Miles received.   A Okay. All right, well, I gave you the correct answer.   Q Now, if it was not a mortgage payment, but actually a payment   at a closing from the sale of property --   A Oh, like the downpayment at closing.   Q Right.   A Same thing.   Q Did you use Miles -- any of the money in Miles's trust account   at times to attempt to make purchases of property?   A Oh, yes.   Q And did you think that that caused you to have to declare that   as income when you made the purchase through Miles?*427    A No, sir.   Q Why not?   A Again, I had this. I thought, an understanding of what a tax-   free exchange was, and I don't think in this game you have to be   off very much. But apparently I was off a little bit on this.   Q Well, what was your understanding in the years at issue --   1985, '-6, '-7, and '8, as to how this tax-free exchange worked   in relation to your tax liability?   A Okay. It's hard to divorce myself from what I think today and   what I thought today -- is that, you could sell a piece of   property, the money goes into escrow, and you take that money   and buy another piece of property, and if you don't -- again, I   refer to it as, take it out and spend it on wine, women, and   song --   Q By that, you mean --   A -- that is reinvestment.   Q By that phrase -- wine, women, and song -- you mean take it   out for yourself, for living.   A Yes, sir.   Q And if you didn't take it out for living, what was your   opinion at that time?   A That it was like a tax-free -- that was the way, and I'm*428  not   far off, but I think I'm off far enough. I understand now that   that was how you do a tax-free exchange.   Q Now, you considered yourself to be in the business of buying   and selling property. Is that correct?   A Yes, pretty much. Yes, sir.   Q Did you think that because you were in the business of buying   and selling property, that that impacted your ability to engage   in tax-free exchanges?   A That was my business.   Q Did you think that you could be in the business of buying and   selling properties, and still engage in tax-free exchanges?   A Oh, yes.   Q I mean, as you sit here today, you know there's a  --   A Yes, now I understand your question, and yes, sir.   Q So back in the years at issue, did you know that there was   this distinction about, even if you do it correctly, it may -- a   tax-free exchange may not be available to a dealer in property?   A Yes, sir. I understand that now.As we have stated previously in this opinion, we were not impressed with petitioner's testimony at trial, generally, and we were certainly*429  not impressed with his supposed understanding of tax free exchanges of property. During the examinations of petitioner's returns for 1985 through 1988, petitioner did not discuss with the revenue agent his beliefs regarding tax free exchanges, and the substantial evidence of concealment of the trust holdings and the sales proceeds in Mr. Miles's law firm trust account indicates that petitioner's use of nominees was for a purpose other than tax-free exchanges.Most importantly, petitioner's testimony and contentions regarding his failure to report income deposited in Mr. Miles's law firm's trust account are contradicted by other evidence of record. Petitioner's purported understanding was that he was not required to report income from his sales of real estate so long as the sale proceeds remained in the trust account and were not disbursed for personal expenses. Petitioner claims that he reported consistently with that understanding. Nevertheless, there were considerable amounts that were disbursed from Mr. Miles's law firm's trust account for personal expenses during the years in issue that were not reported as income. Petitioner does not explain this failure to report. We cannot*430  accept that petitioner had a bona fide misunderstanding of tax free exchanges and that this purported misunderstanding explains his failure to report the substantial amounts of income from real estate transactions.Petitioner argues that fraud penalties should not apply to the amounts which he reported as income on his returns for 1986 through 1988. 95 Petitioner suggests that to the extent those amounts gave rise to underpayments, the underpayments are not attributable to fraud. We disagree.Petitioner's method of preparing his returns for 1985 through 1988 was erroneous, and petitioner was aware at the time he signed those returns that the method was erroneous. His returns for 1985 through 1988 were prepared on the basis of spreadsheets of the deposits to, and disbursements from, his personal bank*431  accounts. Petitioner reported income only to the extent that deposits were made to his personal accounts and, then, only to the extent that the deposit was not classified as a "loan". However, petitioner's reported income from these spreadsheets was substantially offset by disbursements from his personal bank accounts, which he claimed as deductible expenses on his Schedules C.Petitioner contends that the fraud penalties should not be applied to the tax liability which was increased due to the expenses that respondent disallowed. After reviewing the spreadsheets that petitioner used to prepare his returns, we are convinced that many of the expenses that petitioner claimed as deductions were personal in nature. For example, on Schedule C of petitioner's 1985 tax return, he claimed a deduction for commission expenses of $ 14,540, which represented the cost of a ring, earrings, and two necklaces that he purchased for Ms. Allen. On Schedule C of petitioner's 1986 tax return, he deducted the costs of his subscriptions to Playboy and Penthouse magazines. 96 Petitioner also claimed as deductible expenses on his Schedules C: (1) Subscription payments for Sesame Street and Dr. Seuss books; *432  and (2) travel and entertainment expenses for credit card payments to Burdines, Neiman Marcus, Jordan Marsh, Master Card, and Visa; and (3) expenses for gasoline and expenses related to his 25 Ferrari automobiles. These items are inherently personal in nature, and petitioner's claiming those deductions pursuant to his method of preparing his returns for 1985 through 1988 is evidence of fraud.Petitioner also points to certain expenses which he claims are related to his orange grove, cattle, and Ferrari*433  collection activities. He claims that respondent disallowed all expenses relating to those activities, which he claimed on his returns. Petitioner contends that, although it might be appropriate to disallow expense deductions for those activities when determining his deficiencies, fraud penalties should not be imposed on the tax liabilities resulting from their disallowance. However, it is unclear to us the extent to which petitioner claimed those items as expenses on his returns, and, the amounts claimed and disallowed. 97 Petitioner did not prepare separate Schedules C for the orange grove, cattle, and Ferrari collection activities for 1985 through 1988. Instead, he claimed those expenses, along with other expenses including personal expenses, on the Schedules C relating to his real estate business. We also point out that petitioner's method of preparing his returns considered only whether a disbursement was made from his personal bank accounts and not whether that disbursement related to a trade or business or was otherwise a deductible expense.*434  Given petitioner's faulty method of preparing his returns, and the inherently personal nature of many of the expenditures claimed on his returns, petitioner has not established that the portion of the underpayment arising from the disallowed expense deductions is not attributable to fraud. Petitioner has not shown that any portion of the underpayment for each of the years 1986, 1987, and 1988, is not attributable to fraud, and, accordingly, the entire underpayment for each of those years is subject to the addition to tax for fraud.C. Section 6653(b)(2) Addition to Tax for 1985With respect to the section 6653(b)(2) addition to tax for 1985, it is respondent's burden to establish, by clear and convincing evidence, the specific portion of the underpayment which is attributable to fraud.  Hughes v. Commissioner, T.C. Memo. 1994-139;  Franklin v. Commissioner, T.C. Memo 1993-184">T.C. Memo. 1993-184.Pursuant to our discussion above, respondent has proven by clear and convincing evidence that petitioner received taxable income of $ 305,940 and that petitioner is liable for self-employment tax of $ 4,763 for 1985. For purposes of section 6653(b)(2), respondent has proven by clear*435  and convincing evidence an underpayment for 1985, which the parties shall compute under Rule 155 on the basis of our findings and conclusions.Respondent has proven by clear and convincing evidence that petitioner failed to report substantial gains and other income from his real estate transactions and that he did so with fraudulent intent. Petitioner was an experienced real estate developer and businessman. We are convinced that he knew those items were taxable as income when received. Indeed, petitioner was informed during the examination of his 1983 and 1984 returns, which occurred prior to the time petitioner filed his 1985 through 1988 returns, that the sale proceeds deposited into the law firm's trust account were taxable, and petitioner agreed. 98 We cannot accept petitioner's explanation that he misunderstood that if sales proceeds and other items were "reinvested" and held in trust accounts, they would not be taxable until withdrawn for "wine, women, and song". Respondent has produced evidence showing that substantial amounts of income were paid from the trust account per petitioner's instructions for personal expenses and that those withdrawals were not reported as income*436  on his tax returns. Petitioner did not inform respondent's revenue agent, who examined his returns for 1985-1988, that he held this belief regarding tax deferred exchanges, and there is no credible evidence of record showing that petitioner had this purported misunderstanding.Respondent has also proven by clear and convincing evidence that petitioner's method of preparing his return for 1985 was done with a fraudulent intent. On the Schedule C for his real estate business, petitioner reported income and expenses from that business on the basis of spreadsheets of the deposits and disbursements from his personal bank accounts. He reported the deposits, less amounts he classified as "loans", as gross income from his business, and the disbursements, as deductible expenses on the Schedule*437  C. Many of the disbursements were for inherently personal items, including jewelry for Ms. Allen and expenses for his 25 Ferrari automobiles.Unlike most of the unreported items involving gain from real estate transactions that we find were due to fraud, the 1985 foreclosure sale of the Citrus County Property was not a typical sale of real estate. Respondent originally determined that petitioner realized $ 49,907 as cancellation of indebtedness income with respect to the Citrus County Property, in 1987. Respondent first raised the issue of gain from the foreclosure sale as a new matter in his amendment to answer. Respondent has not proven that the portion of the underpayment from the 1985 foreclosure sale of the Citrus County Property was attributable to petitioner's fraud. The addition to tax under section 6653(b)(2) shall not apply to that portion of the underpayment attributable to the gain realized from the foreclosure sale in 1985. Respondent has proven to our satisfaction that the remaining amount of the underpayment for 1985 is attributable to fraud. We hold that the addition to tax under section 6653(b)(2) applies to that amount of the underpayment.III. Statute of Limitations*438  for AssessmentGenerally, the amount of any tax must be assessed within 3 years after the return required to be filed by the taxpayer was filed (whether such return was filed on or after the date prescribed therefor). Sec. 6501(a). However, in the case of a false or fraudulent return with the intent to evade tax, the tax may be assessed at any time. Sec. 6501(c)(1). Respondent bears the burden of proving the applicability of this exception, and he must prove the same elements of fraud under section 6501(c)(1) as he is required to prove with respect to the additions to tax for fraud.  Estate of Johnson v. Commissioner, T.C. Memo 2001-182">T.C. Memo. 2001-182. In this case, respondent has shown by clear and convincing evidence that an underpayment of tax exists for each of the years 1985, 1986, 1987, and 1988, and he has shown that at least some part of that underpayment for each of those years is a result of fraud by petitioner. Therefore, we hold that the open period of limitations of section 6501(c)(1) applies, and section 6501(a) does not bar assessment of petitioner's deficiencies in taxes. See *439  DiLeo v. Commissioner, 96 T.C. at 880. 99Decision will be entered under Rule 155.               * * * * *               Appendix A    INCOME AND DEDUCTIONS REPORTED BY PETITIONER ON RETURNS   RESPONDENT'S DETERMINATIONS OF INCOME AND DEDUCTIONS IN THE          STATUTORY NOTICE OF DEFICIENCY1985:_____Schedule C Income_________________ Amount Reported        Amount Determined     Total Adjustment _______________        _________________     ________________  $ 160,363            $ 448,498     *440      $ 288,135                           Deduction Allowed inDescription of Deduction     Deduction Claimed    Notice of Deficiency________________________     _________________    ____________________Schedule CCar and truck expenses        $ 7,712          - 0 -Commissions              26,840          - 0 -County recording fee expense       ---          $ 640Depreciation and sec. 179  deduction from Form 4562       2,300          3,575Development expense            ---           437Dues and publications          3,677          - 0 -Engineering expense            ---          4,060Insurance                1,277          - 0 -Legal and professional services               9,282          3,609Office expense             6,996*441            316Other interest             43,291         178,435Repairs & maintenance         23,157          - 0 -Taxes                  9,073          29,955Title insurance expense          ---            8Travel and entertainment        15,688          - 0 -Utilities and telephone         3,188          - 0 -                  _______         _______  Total               152,481         221,035Itemized Deductions___________________   Reported by petitioner        ---   Determined by respondent    $ 22,567Personal Exemptions___________________   Reported by petitioner (2)    $ 2,080   Determined by respondent (2)   $ 2,080Taxable Income______________   Reported by petitioner      $ 5,802   Determined by respondent    $ 202,816Tax___  *442  Reported by petitioner       $ 426   Determined by respondent    $ 82,798Self-employment Tax____________________   Reported by petitioner       $ 930   Determined by respondent     $ 4,673Earned Income Credit Recapture______________________________   Determined by respondent      $ 3821986:_____Schedule C Income_________________ Amount Reported        Amount Determined     Total Adjustment _______________        _________________     ________________  $ 119,772            $ 659,361         $ 539,589                           Deduction Allowed inDescription of Deduction     Deduction Claimed    Notice of Deficiency________________________     _________________    ____________________Car and truck expenses        $ 4,807          - 0 -Commissions               6,922          - 0 -County recording fee expense       ---    *443        $ 351Depreciation expense           ---          8,579Dues and publications          1,146          - 0 -Engineering expense            ---          6,380Insurance                 112          - 0 -Interest:  Mortgage (paid to   financial institutions)       ---          - 0 -  Other                76,828         208,287Legal and professional services    11,031          16,870Office expense             3,935           268Repairs & maintenance          4,510          - 0 -Taxes                   ---          63,588Title insurance expense          ---           159Travel                 3,505          - 0 -Utilities and telephone         2,838          - 0 -  *444                  _______         _______  Total               115,634         304,482Itemized deductions___________________   Reported by petitioner        ---   Determined by respondent      $ 48Personal Exemptions___________________   Reported by petitioner (2)    $ 2,080   Determined by respondent (2)   $ 2,160Taxable  Income_______________   Reported by petitioner      $ 2,058   Determined by respondent    $ 352,671Tax___   Reported by petitioner       - 0 -   Determined by respondent    $ 160,671Self- employment Tax____________________   Reported by petitioner       $ 509   Determined by respondent     $ 5,166Political Contribution Credit_____________________________   Reported by petitioner        ---   Determined by respondent      $ 50Earned Income Credit Recapture______________________________   Determined By Respondent      $ 4541987: *445  _____Schedule C Income_________________ Amount Reported        Amount Determined     Total Adjustment _______________        _________________     ________________  $ 138,653           $ 1,157,509        $ 1,018,856                           Deduction Allowed inDescription of Deduction     Deduction Claimed    Notice of Deficiency________________________     _________________    ____________________Appraisal expense             ---          $ 630Car and truck expenses        $ 5,152          - 0 -Commissions               2,840          3,441County recording fee expenses       ---            9Depreciation expense           ---          8,579Development expense            ---           106Dues and publications          1,649            75Engineering*446  expenses           ---          2,272Interest:  Mortgage (paid to  financial institutions)        ---          - 0 -  Other                 619         213,685Legal and professional expenses      ---          8,115Office expense             13,104           126Repairs                41,554          - 0 -Taxes                 24,290          20,509Title insurance expense          ---          10,979Travel                 2,325          - 0 -Utilities and telephone         2,901          - 0 -                   ______         _______  Total                94,434         268,526Itemized Deductions___________________   Reported by petitioner        ---   Determined*447  by respondent    $ 41,021Personal Exemptions___________________   Reported by petitioner (2)    $ 3,800   Determined by respondent (2)   $ 3,800Taxable Income______________   Reported by petitioner     $ 37,879   Determined by respondent     845,510Tax___   Reported by petitioner      $ 7,515   Determined by respondent    $ 316,971Self-employment Tax___________________   Reported by petitioner      $ 5,387   Determined by respondent     $ 5,3871988:_____Schedule C Income_________________ Amount Reported        Amount Determined     Total Adjustment _______________        _________________     ________________   $ 61,921            $ 576,668         $ 514,747                           Deduction Allowed inDescription of Deduction     Deduction Claimed    Notice of Deficiency________________________     _________________    ____________________Advertising expense*448             ---          $ 265Appraisal expense             ---          1,500Car and truck expenses         $ 986          - 0 -Commissions               3,750          3,467County recording fee expenses       ---           146Depreciation expense           ---          8,579Development expense            ---           604Dues and publications           555          - 0 -Engineering expenses           ---          9,500Interest:  Mortgage (paid to  financial institutions)        ---          - 0 -  Other                19,272         222,133Legal and professional services     3,986          5,885Office expense              823           173Repairs                10,182*449           - 0 -Taxes                   510          56,057Title insurance               0          (1,435)Travel,  meals, ent.  Travel                 ---  Meals & ent.             1,081  20% of meals & ent.          (216)  Meals & ent. minus 20%         865          - 0 -Utilities and telephone         2,784          - 0 -                   ______         _______  Total                43,713         306,874S Corporation Loss__________________   Reported by petitioner      $ 4,702   Determined by respondent     $ 4,702Itemized Deductions___________________   Reported by petitioner        ---   Determined by respondent    $ 38,661Personal Exemptions___________________   Reported by petitioner (2)    $ 3,900   Determined by respondent (2) *450    $ 3,900Taxable Income______________   Reported by petitioner      $ 5,206   Determined by respondent    $ 218,131Tax___   Reported by petitioner       $ 784   Determined by respondent    $ 62,169Self-employment Tax___________________   Reported by petitioner      $ 2,371   Determined by respondent     $ 5,859Earned Income Credit Recapture______________________________   Determined by respondent      $ 37               Appendix B       ADDITIONAL INCOME AND CLAIMED DEDUCTIONS      RAISED IN PETITIONER'S SUPPLEMENT TO PETITION        AND RESPONDENT'S AMENDMENT TO ANSWERPetitioner's Supplement to PetitionPetitioner claims that respondent erred in disallowing expenses and in failing to allow expenses relating to his land development business, orange grove business, cattle business, and interest expense.Petitioner claims to have incurred the following expenses as to part- time labor with grove, cattle, and general property maintenance and repair:   *451      Tax Year          Expenses       ________          ________        1985            $ 787        1987            4,782        1988            3,765Petitioner claims to have incurred the following expenses as to orange grove agricultural dues and fees, supplies and equipment along with grove fertilizer, general maintenance and repairs, and development work:       Tax Year          Expenses       ________          ________        1985          $ 15,628.42        1986            2,716.22        1987           27,409.61        1988           33,136.92Petitioner claims to have incurred the following expenses as to the purchase of cattle, feed, supplies and equipment:       Tax Year          Expenses       ________          ________   *452       1985          $ 7,508.94        1986           1,656.61        1987           7,349.77        1988            125.00Petitioner claims to have incurred the following expenses as to vintage automobiles:       Tax Year          Expenses       ________          ________        1985          $ 16,125.77        1986           28,938.78        1987           72,951.91        1988             349.17Respondent's Amendment to AnswerCitrus County Property: Respondent originally determined that petitioner realized $ 49,907 as forgiveness of indebtedness income in 1987. Respondent alternatively alleges that petitioner realized $ 112,156 of ordinary income from the sale of that property in 1985.Tai Property: Respondent alleges that petitioner realized additional income of $ 50,863 from the sale of real property in 1985.As a result of those allegations, *453  respondent asserts an additional deficiency of $ 80,523. Thus, respondent claims a total revised income tax deficiency of $ 167,056 for 1985.Respondent also alleges that those items of income were omitted with fraudulent intent to evade tax and asserts an increased sec. 6653(b)(1) addition to tax of $ 40,402 (revised addition to tax for fraud of $ 84,188 for 1985), and an increased sec. 6653(b)(2) addition to tax of 50 percent of the interest due on the revised underpayment of $ 167,056.Total adjustments to Schedule C income:        $ 163,019Taxable income from notice of deficiency:       $ 202,816Corrected taxable income:               $ 365,835Tax:                          $ 163,321Self-employment tax:                   $ 4,673Total corrected tax liability:             $ 167,994Total tax shown on return or as previously adjusted:   $ 1,320Adjustment to earned income credit:           ($  382)Deficiency - increase in tax:             $ 167,056     *454            Appendix C            CONCESSIONS 100          SCHEDULE C MISCELLANEOUS INCOME                        Taxable Year                        ____________                  1985     1986     1987     1988                 ________________________________________Notice of deficiency____________________*455    Miscellaneous income     $ 12,357   $ 27,019   $ 73,907   $ 24,000Amounts conceded by petitioner______________________________   Commission Income       $ 6,357    $ 3,019    - 0 -    - 0 -   Rent              6,000    24,000   $ 24,000   $ 12,000    Total            12,357    27,019    24,000    12,000Amounts conceded by respondent______________________________   Forgiveness of debt       - 0 -     - 0 -   $ 49,907*     $ 0Amounts in dispute__________________   Rent              - 0 -     - 0 -    - 0 -   $ 12,000*Respondent concedes his forgiveness of debt determination for 1987. However, he raises as new matter that petitioner realized $ 112,156 of ordinary income from the sale by foreclosure of the Citrus County Property in 1985. See appendix B.        SCHEDULE  C GAINS FROM PROPERTY SALES                        Taxable Year               *456           ____________                  1985     1986     1987     1988                 ________________________________________Notice of deficiency____________________   Gains on property sales   $ 247,154  $ 417,788   $ 995,801  $ 375,268Amendment to answer___________________   Tai Property         $ 50,863    - 0 -     - 0 -    - 0 -Amounts conceded by petitioner______________________________   OS-13             $ 4,854    - 0 -     - 0 -    - 0 -   OS-06             10,270   $ 13,100     - 0 -   $ 12,950   OS-49             20,000    - 0 -   $ 94,446    - 0 -   OS-1.2             6,878    - 0 -    29,124    - 0 -   OS-61             92,796    - 0 -     - 0 -    - 0 -   OR-01              - 0 -    72,039    823,078    - 0 -   OS-29       *457         - 0 -    2,570     - 0 -    - 0 -   OS-31              - 0 -    48,432     - 0 -    - 0 -   OR-ABC             - 0 -    18,783     - 0 -    - 0 -   OS-23              - 0 -    - 0 -     - 0 -   154,170                 _______   _______    _______   _______    Total           134,798   154,924    946,648   167,120   Concession relating to   amendment to answer   ______________________     Tai Property      $ 50,863    - 0 -     - 0 -    - 0 -Amounts conceded by respondent______________________________   OS-06             $ 1,000   $ 1,000     - 0 -   $ 1,000   OS-1.4             6,144    12,289   $ 24,577    - 0 -   OS-29              - 0 -    42,480     - 0 -    - 0 -   OS-22              - 0 -    - 0 -     - 0 -   *458  55,164                 ______    ______    ______    ______     Total           7,144    55,769    24,577    56,164Amounts in dispute__________________   OS-03            $ 20,097   $ 21,097     - 0 -   $ 77,298   OS-06             59,272    - 0 -     - 0 -    - 0 -   OS-35             19,699    - 0 -     - 0 -    - 0 -   OS-1.4             6,144    12,289   $ 24,577    - 0 -   OS-47              - 0 -    41,776     - 0 -    - 0 -   OS-47              - 0 -    50,726     - 0 -    19,522   OS-1.3             - 0 -    20,502     - 0 -    - 0 -   OS-39              - 0 -    60,706     - 0 -    - 0 -   OS-22              - 0 -    - 0 -     - 0 -    55,164                 _______   _______ *459     ______   _______     Total          105,212   207,096    24,577   151,984*Petitioner on brief concedes that his share of the gain from the sale of the Mefford Property (OS-22) was $ 55,164.           SCHEDULE  C INTEREST INCOME                        Taxable Year                        ____________                  1985     1986     1987     1988                 ________________________________________Notice of deficiency____________________   Interest income       $ 54,024   $ 22,224   $ 20,061    - 0 -Amounts conceded by petitioner______________________________   Payee   _____   Botos              - 0 -    - 0 -     $ 400    - 0 -   Horton             - 0 -   $ 10,614     - 0 -    - 0 -   Tai             $ 27,718    - 0 -     - 0 - *460     - 0 -   Commonwealth Int.        - 0 -    - 0 -     8,305    - 0 -   Muroff             12,761    - 0 -     - 0 -    - 0 - Miles              - 0 -    - 0 -      380    - 0 -                 ______    ______     _____    _____     Total           40,479    10,614     9,085    - 0 -Amounts conceded by respondent______________________________   Payee   _____   Bettner, et al.        $ 6,773   $ 5,805    $ 5,488    - 0 -Amounts in dispute__________________   Payee   _____   Bettner, et al.        $ 6,773   $ 5,805    $ 5,488    - 0 -          SCHEDULE  C COMMISSION INCOMENotice of deficiency____________________   Commission income-1985          $ 67,749   Commission income-1986           32,383   Commission income-1987           - 0 -   Commission income-1988  *461           - 0 -Amounts conceded by petitioner______________________________   Commission income-1985   _______________________     Account (Date of deposit)     _________________________     Freedom (01/03/85)           $ 500     Freedom (01/18/85)          18,562     Freedom (06/10/85)            500     Freedom (07/22/85)          10,530     Tucker (03/01/85)            157                       ______      Total                30,249   Commission income-1986*   _______________________     Account (Date of deposit)     _________________________     Freedom (01/08/86)          $ 1,817     Freedom (01/17/86)           1,600     Freedom (04/10/86)           4,680     Freedom (06/20/86)           5,215     Freedom (07/24/86) *462            1,588     Freedom (08/01/86)          13,558     Freedom (08/25/86)           3,000     Freedom (10/03/86)            600     Freedom (12/12/86)            300                       ______      Total                32,358*The amounts of commission income for 1986 were not part of respondent's reconciliation of Schedule C commission income; however, petitioner agrees to respondent's requested finding that he received those amounts as income in 1986.Amounts in dispute__________________   Commission income-1985   ______________________     Account (Date of deposit)     _________________________     Freedom (02/06/85)         $ 37,500   Commission income-1986     ______________________     None                  - 0 -The statutory notice of deficiency determined $ 32,383 as commission income for 1986. However, on*463  brief, respondent states $ 32,358 as the amount of commission income for 1986. Respondent has apparently conceded the $ 25 difference between these two figures.        SCHEDULE  C RENT FROM CRAZY COMMANDOSNotice of deficiency____________________   Rent from Crazy Commandos-1985      $ 1,353Amounts conceded by respondent______________________________   Rent from Crazy Commandos-1985       $ 103Amounts in dispute__________________   Rent from Crazy Commandos-1985      $ 1,250         SCHEDULE C UNIDENTIFIED DEPOSITSNotice of deficiency____________________   Unidentified deposits-1985        $ 60,854   Unidentified deposits-1986        159,349   Unidentified deposits-1987         67,740   Unidentified deposits-1988        177,400Amounts conceded by petitioner______________________________   Unidentified deposits-1985   _________________________   Account (Date of deposit)   _________________________   Tucker (08/01/85)     *464          $ 1,700   Unidentified deposits-1986   __________________________   Account (Date of deposit)   _________________________   Freedom (04/14/86)            $ 6,000   Freedom (09/09/86)             11,186   Freedom (12/16/86)             7,000                       ______     Total                 24,186   Unidentified deposits-1987   __________________________   None                    - 0 -   Unidentified deposits-1988   __________________________   Account (Date of deposit)   _________________________   Freedom (03/21/88)            $ 2,200   Tucker (09/07/88)              2,200                        _____     Total                 4,400Amounts conceded by respondent______________________________   Unidentified deposits*465     _____________________   Account (Date of deposit)   _________________________   Tucker (09/30/85)              $ 154   Unidentified deposits-1986   __________________________   Account (Date of deposit)   _________________________   Ledger (08/01/86)             $ 9,038   Ledger (08/15/86)             41,003                       ______     Total                 50,041   Unidentified deposits-1987   __________________________   None                    - 0 -   Unidentified deposits-1988   __________________________   Account (Date of deposit)   _________________________   Freedom (03/24/88)            $ 33,000Amounts in dispute__________________   Unidentified deposits-1985   __________________________   Account (Date of deposit)   _________________________   Tucker (03/12/85)            $ 59,000*466     Unidentified deposits-1986   __________________________   Account (Date of deposit)   _________________________   Freedom (05/06/86)             $ 300   Ledger (09/16/86)             84,522   Ledger (10/10/86)               300                       ______     Total                 85,122   Unidentified deposits-1987   __________________________   Account (Date of deposit)   _________________________   Tucker (04/09/87)            $ 67,740   Unidentified deposits-1988   __________________________   Account (Date of deposit)   _________________________   Ledger (07/08/88)            $ 140,000       SCHEDULE C NATIONAL LAND COMMISSION INCOMENotice of deficiency____________________   Natl. Land Commissions-1985        $ 4,607   Natl. Land Commissions-1986          598Amounts conceded by respondent______________________________*467     Natl. Land Commissions- 1985       $ 4,607**According to respondent's concession, this is a net amount composed of commission income received from, and commission expenses paid to, National Land.Respondent is actually conceding commission income of $ 8,873; which eliminates the $ 4,607 adjustment in the notice of deficiency and results in a negative adjustment of $ 4,266 ($ 4,607 - $ 8,873).Amounts in dispute__________________   Natl. Land Commissions-1985         - 0 -   Natl. Land Commissions-1986         $ 598         SCHEDULE  C SALE WAX MYRTLE TREESNotice of deficiency____________________   Sale Wax Myrtle Trees-1985         $ 400Amounts in dispute__________________   Sale Wax Myrtle Trees-1985         $ 400             SCHEDULE E INCOME*Notice of deficiency____________________   Schedule E income-1987          $ 3,888Amounts in dispute__________________   Schedule E income-1987          $ 3,888*This item was not reflected*468  in respondent's reconciliation schedules.               Appendix D          ITEMS RESPONDENT RELIES UPON AS      CLEAR AND CONVINCING EVIDENCE OF UNDERPAYMENT1985:Stipulated Income:      Income Item                Amount      ___________                ______  Miscellaneous Sch. C income            $ 12,357  Gains from property sales             185,661  Interest income                   40,479  Commission income                  30,249  Unidentified deposits                1,700                          _______    Total stipulated income            270,446Disputed Income:       Income Item               Amount       ___________               ______  Gain from sale of Lot 1 in   *469  Susan's Lakefront Estate           $ 20,097  Installment gain from sale of    3 lots in Florida Fruit Belt Subd.       28,347  Gain from sale of installment note         30,925  Gain from sale of Lot 23, High Plains        19,699  Installment gain from Silver Lake sale        6,144  Gain from foreclosure sale of    Citrus County Property             112,156  Interest income from Silver Lake mortgage      6,773  Commission income                  37,500  Rental income                    1,250  Unidentified deposit                59,000                          ________    Total disputed income             321,891Total income relied upon by respondent (stipulated income +  disputed income):   $ 592,337Less reconstructed Schedule C expenses  (after concessions on brief):   $ 225,301Less itemized deductions:   $ 22,567Less personal exemptions: *470    $ 2,080Taxable income:   $ 342,389Tax liability (based on head of household filing status): $ 151,597Plus self-employment tax:   $ 4,673CLAIMED UNDERPAYMENT FOR 1985:   $ 156,2701986:Stipulated Income:     Income Item                 Amount     ___________                 ______  Miscellaneous Sch. C income            $ 27,019  Gains from property sales             154,924  Interest income                   10,614  Commission income                  32,357  Unidentified deposits                24,186                          ________    Total stipulated income            249,100Disputed Income:       Income Item               Amount       ___________               ______  Gain from sale of Tract A in    Susan's Lakefront Estate*471            $ 21,097  Gain from sale of parcel in Grissom Parcels     20,502  Installment gain from Silver Lake sale       12,288  Gain from sale of 62.5 acres in East Lake Vista   92,502  Gain from exchange of Arrowhead Lakes Subd.    for Angel-Royse Property            60,706  Interest income from Silver Lake mortgage      5,805  Unidentified deposits                9,638                          ________    Total disputed income             222,538Total income relied upon by respondent (stipulated income +  disputed income):   $ 471,638Less reconstructed Sch. C expenses  (after concessions on brief):   $ 298,656Less itemized deductions:   - 0 -Less nonitemized contributions:   $ 48Less personal exemptions:   $ 2,160Taxable income:   $ 170,774Tax liability (based on head of household filing status): $ 69,723Plus self-employment tax:   $ 5,166CLAIMED UNDERPAYMENT FOR 1986:   $ 74,8891987:Stipulated Income:  *472       Income Item               Amount       ___________               ______  Miscellaneous Sch. C income            $ 24,000  Gains from property sales             946,649  Interest income                   9,084                          ________    Total stipulated income            979,733Disputed Income:       Income Item                Amount       ___________                ______  Installment gain from Silver Lake sale       $ 24,577  Interest income from Silver Lake mortgage       5,488                           _______    Total disputed income               30,065Total income relied upon by respondent (stipulated income +  disputed income):   $ 1,009,798Less reconstructed Sch. C expenses  (after concessions*473  on brief):   $ 265,076Less itemized deductions:   $ 43,561Less personal exemptions:   $ 3,800Taxable income:   $ 697,361Tax liability (based on head of household filing status): $ 259,934Plus self-employment tax:   $ 5,387Less tax per return:   $ 12,902CLAIMED UNDERPAYMENT FOR 1987:   $ 252,4191988:Stipulated Income:       Income Item               Amount       ___________               ______  Miscellaneous Sch. C income            $ 12,000  Gains from property sales             167,120  Unidentified deposits                4,400                          ________    Total stipulated income            183,520Disputed Income:       Income Item                Amount       ___________               _______  Gain from sale of Lots 6-30 in    Susan's Lakefront Estate         *474     $ 77,298  Gain from sale of 10 acres in East Lake Vista     19,522  Gain from sale of Mefford Property          55,164  Rent received from Island Living, Inc.        12,000  Unidentified deposit                 140,000                          _________    Total disputed income              303,984Total income relied upon by respondent (stipulated income +  disputed income):   $ 487,504Less reconstructed Sch. C expenses  (after concessions on brief):   $ 301,910Less itemized deductions:   $ 44,651Less personal exemptions:   $ 3,900Taxable income:   $ 137,043Tax liability (based on head of household filing status): $ 39,035Plus self-employment tax:   $ 5,859CLAIMED UNDERPAYMENT FOR 1988:   $ 44,894 Footnotes1. The concessions of petitioner and respondent, as well as the amounts which remain in dispute, are detailed in app. C. Petitioner on brief adopts respondent's statement of the issues settled by the parties and the accompanying schedules thereto.↩2. Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the years in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure.↩3. Michael Johnson was petitioner's cousin.↩4. The bill of sale and the application for a temporary tag for the Ferrari were in the name of Mr. Miles's law firm; however, petitioner was its actual owner.↩5. Mr. Kelly is a certified public accountant who has known petitioner since 1975. Mr. Kelly and petitioner were members of the Ferrari Club of America.↩6. The spreadsheets were prepared by Ms. Allen at petitioner's request. Petitioner provided Ms. Allen guidance in preparing the spreadsheets.↩7. Mr. Kelly discussed Schs. K-1 with Mr. Miles and Mr. Miles's accountant. However, the accountant informed him that Schs. K-1 would not be provided and that any information that would have been on those schedules should be put on petitioner's personal income tax returns.↩8. Petitioner claimed an S corporation loss from Frank's Corner, Inc., of $ 4,702 in 1988.↩9. At trial, petitioner claimed that the name John Waltin was not a fictitious name because "there's probably a John Waltin somewhere."↩10. Mr. Miles testified that he supposed that he got this information from petitioner.↩11. The financial statements dated June 1, 1988, and Sept. 20, 1989, do not include a listing for petitioner's automobile collection.↩12. Petitioner's representative would not allow petitioner to meet with respondent's revenue agent assigned to examine his returns or to extend the period of limitations, unless respondent gave petitioner immunity from criminal prosecution.↩13. Petitioner claims to have previously filed timely returns for 1985 and 1986; however, respondent could not find those purported returns. Petitioner did not produce copies of any such returns, and he did not present any evidence or testimony on the subject of those purported returns.↩14. Respondent computed the installment gain in 1985 as follows: Gross profit ($ 59,272) = sales price ($ 69,000) minus selling expenses ($ 412) minus basis ($ 9,316); gross profit percentage (0.859014) = gross profit ($ 59,272)/contract price ($ 69,000); income from installment sale ($ 28,347) = payments in 1985 ($ 33,000) x gross profit percentage (0.859014).↩15. Respondent computed the gain from the purported sale of the installment obligation as follows: Gain from sale of installment obligation ($ 30,925) = face value of the obligation sold ($ 36,000) x gross profit percentage (0.859014).↩16. Petitioner testified that he signed a promissory note to his father as collateral; however, he did not produce any such note for the record. Petitioner relies solely on his testimony and cites the fact that records and witnesses have been lost or are unavailable.↩17. We note that a mortgage generally secures payment of the underlying installment obligation and that an assignment of the mortgage without an assignment of the note creates no right in the assignee with respect to the note. See  Vance v. Fields, 172 So. 2d 613">172 So. 2d 613, 614↩ (Fla. Dist. Ct. App. 1965).18. Petitioner incurred selling expenses of $ 23,831 for this sale.↩19. Cost basis for each lot and tract ($ 1,903) = cost of the entire property ($ 59,005)/the number of lots and the tract (31).↩20. Gain realized ($ 20,097) = amount realized ($ 22,000) - adjusted basis ($ 1,903).↩21. Gain realized ($ 21,097) = amount realized ($ 23,000) - adjusted basis ($ 1,903).↩22. Gross Profit ($ 468,594) = sales price ($ 540,000) - selling expenses ($ 23,831) -total of the adjusted bases in lots 6-30 ($ 47,575); gross profit percentage (0.867767) = gross profit ($ 468,594)/contract price ($ 540,000); installment gain from sale in 1988 ($ 77,298) = payments received in 1988 ($ 89,077) x gross profit percentage (0.867767).↩23. And with respect to the declaration of trust, Mr. Schoolfield testified:   Q What property did this Declaration of Trust pertain to?   A There's nothing attached to it. I -- it could have been this   property or another piece, but --   Q Okay. Did this Declaration of Trust pertain specifically to   this Lot 23?   A I -- I don't know. That's -- I don't think so, but I don't   know. It's been too long for me. I don't recall ever owning this   piece.↩24. On recross-examination by petitioner's counsel, Mr. Schoolfield testified:   Q Ultimately at some point in time, these various 5-acre tracts,   of which you and Walter were 50 percent beneficial owner   interest in, were sold and then also you and he ultimately   divided up what was left; is that right?   A I don't know that that's correct. What was left, we --   somewhere in there I said, "Here, look, let me have X tracts   and this is -- and you take the rest of it. You take it   all."   Q And as you sit here today, you're not sure when that happened,   what the date of that was.   A That's correct. I don't know that I can give you a date. I   don't think I could.   Q So, am I correct in your testimony that if that date happened,   if you split up, and the document, the deed on page 1 is one of   the 5-acre tracts that Walter got, then you would not have had   any interest in it if it went to Walter after you and he split   up.   A Yeah.   Q And if it happened before the split-up, then you would have   had an interest in it.   A I think that probably is correct.   Q And as you sit here today, because of the number of years that   have gone by, in fact you don't have your tax returns anymore,   you can't specifically tell us for sure when that happened in   relation to this sale; is that right?   A Not sitting here today, I can't.↩25. Respondent computed petitioner's gross profit percentage as follows: Gross profit ($ 150,600) = sales price ($ 220,600) minus basis ($ 70,000); gross profit percentage (0.682684) = gross profit ($ 150,600)/contract price ($ 220,600). Respondent then applied the gross profit percentage to each of the principal payments in 1985, 1986, and 1987, respectively, and divided the result in half to account for petitioner's 50-percent interest.↩26. The mortgage provides for interest of 10 percent, per annum, and requires "Three equal annual payments of $ 150,793.05 including principal and interest commencing one year from the date hereof and continuing each year thereafter until the entire balance plus interest is paid in full." A satisfaction of mortgage was issued by Reba Smith and was filed on Dec. 18, 1986.↩27. Petitioner testified that East Lake Vista is also known as the "Narcoossee property" and the "Dan Smith Road property". The parties also agree that the property was sometimes called the "Reba Smith property".↩28. Respondent allocated basis of $ 3,191.83 to each acre in East Lake Vista: Basis per acre ($ 3,191.83) = purchase price ($ 500,000)/acres purchased (156.65). Respondent determined $ 41,775 as petitioner's gain from the May 1986 sale: Gain realized ($ 83,550) = sales price ($ 205,000) -selling costs ($ 22,503) -basis ($ 98,947 = 31 acres x $ 3,191.83); petitioner's gain ($ 41,775) = gain realized ($ 83,550) x petitioner's ownership interest (50 percent). Respondent determined $ 50,726 as petitioner's gain on the Dec. 16, 1986, sale: Gain realized ($ 101,452) = sales price ($ 215,181) -selling costs ($ 13,187) - basis ($ 100,542 = 31.5 acres x $ 3,191.83); petitioner's gain ($ 50,726) = gain realized ($ 101,452) x petitioner's ownership interest (50 percent). Respondent determined $ 19,522 as petitioner's gain on the 1988 sale: Gain realized ($ 39,045) = sales price ($ 80,000) -selling costs ($ 9,005) -basis ($ 31,950 = 10.01 acres x $ 3,191.83); petitioner's gain ($ 19,522) = gain realized ($ 39,045) x petitioner's ownership interest (50 percent).↩29. Dr. Gant testified that he could not recall when the parties original understanding changed, but he suggested that it might have been in 1984.↩30. Dr. Gant testified that he gave petitioner $ 125,000 in 1984 for the purchase of East Lake Vista. This amount represents the initial cash portion of the purchase price for the property. Dr. Gant testified: "I didn't pay any more. We paid it out of operations at the time."↩31. According to petitioner, the Medlin/Gant ledger card represents "an account in which both Medlin and Gant have an interest."↩32. The "hallmarks" of a loan are: (1) Consensual recognition between the borrower and the lender of the existence of the loan, i. e., the obligation to repay; and (2) bona fide intent on the part of the borrower to repay the funds advanced.  Inv. Research Associates, Ltd. v. Comm'r, T.C. Memo. 1999-407↩.1. The basis allocated equals the purchase price multiplied by the percentage of the total assessed value of the parcels↩33. Gain ($ 20,502) = sales price ($ 40,000) -selling expenses ($ 4,458) -basis ($ 15,040).↩34. This is especially true when there is nothing in the record indicating that the tax-assessed value was intended to represent fair market value.  Kellahan v. Commissioner, T.C. Memo. 1999-210;  Estate of Dowlin v. Commissioner, T.C. Memo. 1994-183; see also sec. 20.2031-1(b), Estate Tax Regs↩.35.  In 2554-58 Creston Corp. v. Comm'r, 40 T.C. 932">40 T.C. 932, 940↩ n. 5 (1963), we stated: "Although valuations for real estate taxes may often be too low to be relied upon as furnishing the correct value of a particular parcel of real estate as a whole, we have no reason to reject the use of such valuations in determining the relative value of land and buildings."36. Petitioner testified:   Q And what value do you place as to the basis when you bought it   -- of the total purchase price, what value do you attribute to   the value of parcel 1?   A I had figured that it was worth at least half of the entire   purchase, which would mean that it was equivalent to the other   two parcels put together.↩37. Gain realized ($ 12,042) = amount realized ($ 40,000) - selling expenses ($ 4,458) -basis ($ 23,500).↩38. Petitioner referred to the Angel-Royse Property as the "Angel-Royce [sic] Development", the "Angel and Royce [sic] Property" and the "pit piece". Mr. McLaughlin also referred to the Angel-Royse Property as the "Boggy Creek Road" property.↩39. Osceola County assessed a value of $ 180,000 for the 40 acres acquired in early 1983 and assessed a value of $ 132,600 for the 34 acres acquired on Oct. 26, 1983.↩40. Value of Mr. McLaughlin's interest in the Angel-Royse Property ($ 156,300) = fair market value of the Angel-Royse Property ($ 312,600) x Mr. McLaughlin's interest (50 percent).↩41. Amount realized ($ 101,009) = value of Mr. McLaughlin's interest in the Angel-Royse Property ($ 156,300) + discharge by Mr. McLaughlin of petitioner's debt ($ 15,250) + assumption by Mr. McLaughlin of real estate taxes ($ 1,251) - petitioner's assumption of Mr. McLaughlin's share of the liabilities associated with the Angel-Royse Property ($ 68,622) -property taxes ($ 3,170). Gain on exchange ($ 60,709) = amount realized ($ 101,009) -basis ($ 40,300).↩42. Sec. 731(a)(1)↩provides that in the case of a distribution by a partnership to a partner "gain shall not be recognized to such partner, except to the extent that any money distributed exceeds the adjusted basis of such partner's interest in the partnership immediately before the distribution".43. Mr. McLaughlin and petitioner testified that their supposed partnership owned the Arrowhead Lakes Subdivision lots. They testified that they were equal partners with respect to both the Arrowhead Lakes Subdivision lots and the Angel-Royse Property. Petitioner contends that the partnership was terminated with the properties' being distributed equally. He claims that the properties exchanged were of equal value after accounting for the environmental liabilities associated with the Angel-Royse Property.↩44. This finding is supported by a letter from Mr. Miles to Mr. McLaughlin's attorney; he states:   I trust you will recall that Walter and Roger discussed with you   and I a settlement of the existing dispute over the Royse-Angell   property by an even exchange of Walter's interest in the   Arrowhead Lakes property for Roger's interest in the Royse-   Angell property. Walter apparently feels that he can salvage the   Angell-Royse property and has directed me to proceed with the   proposed settlement. * * *↩45. Petitioner testified that Mr. McLaughlin "let a guy come in and cut all the trees on the property and start digging out the dirt", and that these operations resulted in considerable environmental problems. The record also contains a letter from Mr. Miles, in which he complains to petitioner and Mr. McLaughlin that they had not paid their installments on the 1986 mortgages associated with the property and that the mortgagees were threatening foreclosure.↩46. Mr. Schoolfield was interested in the front piece of the property, and petitioner was interested in the back piece.↩47. Petitioner was the beneficiary of the property interest held in trust by Mr. Gibson.↩48. Petitioner and Agri-Land Corp. were originally the beneficiaries of 50-percent interests, respectively, in the property held in trust by "Mr. Wright" (parcel 3). Agri- Land's interest in this parcel subsequently terminated.↩49. According to petitioner, he ended up with a piece of the Prather Ranch Property in its southeast corner; Mr. Schoolfield owned a piece in front of petitioner's, which had "good access"; and Mr. Hagen owned a 400-acre piece south of Mr. Schoolfield's. Petitioner testified that Mr. Schoolfield was interested in purchasing Mr. Hagen's piece, and according to petitioner:     And as part of an accommodation for him to buy the Hagen   piece, I was going to buy his piece that was next to my portion   of this 1,500 acres. So that would leave me with Wayne's piece   and my piece, but to accomplish that -- I didn't have the cash   to give Wayne for it -- so we went, both jointly, went and sat   down and worked out a deal with Mr. Hagen.     And the end result of the deal was that Mr. Hagen would,   out of his 400 acres, would trade 240 acres, I believe it was,   with Wayne. So he and Wayne did a trade of 240 acres. That meant   that Hagen owned the 240 acres next to my piece and, at the same   time, then Wayne purchased the remaining portion of the 400   acres from Mr. Hagen that was down in Osceola County. The 240   acres that Mr. Hagen now owns, up in Orange County, next to my   piece, I purchased from him. I added to my holding by purchasing   the property from Mr. Hagen, that he'd acquired from Wayne.↩50. At the time of the sale, petitioner was the beneficiary of a 90.689-percent interest in parcels 2 and 3, which interest was held in trust by Mr. Miles.↩51. The following factors are considered in answering those questions:   (1) the nature and purpose of the acquisition of the property   and the duration of the ownership; (2) the extent and nature of   the taxpayer's efforts to sell the property; (3) the number,   extent, continuity and substantiality of the sales; (4) the   extent of subdividing, developing, and advertising to increase   sales; (5) the use of a business office for the sale of the   property; (6) the character and degree of supervision or control   exercised by the taxpayer over any representative selling the   property; and (7) the time and effort the taxpayer habitually   devoted to the sales. [ Sanders v. United States, 740 F.2d 886">740 F.2d 886, 889   (11th Cir. 1984);  United States v. Winthrop, 417 F.2d 905">417 F.2d 905, 910   (5th Cir. 1969).]The frequency and substantiality of sales is the most important factor of those listed.  Suburban Realty Co. v. United States, 615 F.2d 171">615 F.2d 171, 176 (5th Cir. 1980);  Biedenharn Realty Co. v. United States, 526 F.2d 409">526 F.2d 409, 416 (5th Cir. 1976);  Hancock v. Commissioner, T.C. Memo. 1999-336↩.52. Petitioner also testified:     Q When you say -- was that something -- did you intend to   deal with that property as you deal with most of your other   properties?     A You're meaning develop it and immediately sell it and   stuff like that?     Q Right.     A No.We cannot accept petitioner's testimony in and of itself that he did not intend to resell the property on its acquisition. Further, for reasons previously stated, we must reject petitioner's suggestion that his business was confined to the development and immediate sale of properties. The record suggests several properties were acquired, held for a considerable length of time, and then sold without development.↩53. We also note that the 1982-1983 series of trades and purchases orchestrated by petitioner and Mr. Schoolfield are highly indicative of a business acquisition. Through that series of maneuvers, petitioner was able to acquire a parcel of property with "good access" and we suspect a property with a higher probability of resale under favorable circumstances.↩54. A cattle guard is "a device consisting of a shallow ditch across which ties or rails are laid far enough apart to prevent livestock from crossing that is often used instead of a gate at a fence opening". Webster's Third New International Dictionary 354 (1986). Petitioner testified that the cattle guard he installed was a "huge concrete thing", which cost $ 1,600 and weighed about 5,000 pounds.↩55. Petitioner testified that as he was preparing to move cattle to the Prather Ranch Property, Mr. Carter "came along and made me an offer I couldn't refuse."↩56. Petitioner testified in relevant part:     Well, what I had done was I had, in the course of doing   this, I had investigated with him -- I'd known Mike [Partin] for   years -- getting into the cow business, with just the piece I   had. And then I get tied up with acquiring this other Hagen   piece.     Meanwhile, I had already started buying cows from Mike and   we had a piece of property nearby that I moved the cows to and   put them on. Well, they, you know, same thing, you start buying   too many cows and they start having babies and you're trying to   keep them all as best you can and so I ended up kind of with too   many.     But just about the time I was getting ready to -- I felt   like I had enough cows -- to move up to this piece of property,   which was probably ten miles from my house, where the other   piece was probably two miles from my house, that to get enough   cows to put up there on this piece of property, Mr. Maury Carter   came along and made me an offer I couldn't refuse. And by then I   was probably up to my eyeballs in something else and was over my   head in the cow business -- had more cows that I could handle.↩57. The Court's final judgment recited that the outstanding debt to Freedom consisted of $ 96,872.18 principal, together with interest of $ 3,553.20 and attorney's fees of $ 4,000.↩58. Respondent originally determined that petitioner realized cancellation of indebtedness income. Respondent now concedes this determination.↩59. A foreclosure, like a voluntary sale, is a disposition within the scope of the gain or loss provisions of sec. 1001. See Helvering v. Hammel, 311 U.S. 504">311 U.S. 504, 85 L. Ed. 303">85 L. Ed. 303, 61 S. Ct. 368">61 S. Ct. 368 (1941);  2925 Briarpark, Ltd. v. Commissioner, 163 F.3d 313">163 F.3d 313, 318 (5th Cir. 1999), affg. T.C. Memo 1997-298">T.C. Memo. 1997-298; 1 C.B. 12">1990-1 C.B. 12, 1990 IRB LEXIS 70, 8 I.R.B. 5">1990-8 I.R.B. 5, Rev. Rul. 90-16↩, 1990-1 C. B. at 13.60. At trial, petitioner cross-examined Revenue Agent Sherri Blackton, but he failed to establish through that witness that Freedom Savings & Loan Association was the same entity as Freedom Financial Center. Indeed, Ms. Blackton testified that they might be separate entities.↩61. This ledger card relates to ledger card No. 70043, which has its title line partially cut off. The title line does show "Partin", "P. O. Box 521 Kissimmee, FL", and lists the "Adverse Party" as "Partin Property".↩62. The record contains a Tucker State Bank signature card, which contains account information for account No. XXXX8066. That record contains the signatures of petitioner and Ms. Allen, shows the type of account as a trust with a "separate agreement", and states an initial deposit of $ 67,740 having been made on "4/8/87".The record contains a Tucker State Bank signature card, which contains account information for account No. XXXX8066. That record contains the signatures of petitioner and Ms. Allen, shows the type of account as a trust with a "separate agreement", and states an initial deposit of $ 67,740 having been made on "4/8/87".↩63. Petitioner cites the testimony of Revenue Agent Sherri Blackton that petitioner would at times borrow funds which were secured by giving a deed to the property with an option to buy the property back. However, this does not establish that petitioner engaged in this type of transaction with Richard Margolis on this particular occasion.↩64. And, indeed, it could indicate that the transaction was in fact a sale of the property. Proceeds from a sale of property would not be a nontaxable source of income.↩65. Of course, it is likely that many of these expenses were related to properties that petitioner sold but failed to report. We point out that the largest items of additional expense deductions are interest and taxes which appear to be linked to properties which petitioner sold as part of his real estate business.↩66. The residence was originally titled in the name of Mr. Miles, as trustee; however, on Aug. 10, 1990, Mr. Miles conveyed title to the residence to petitioner.↩67. Mr. Partin testified that "the Brahman business was really good. We had good foreign sales, good domestic sales. And I just told him that I thought it would be a good business for him to get into. He had some land he could put some cattle on." He also testified that "we were selling our yearling bulls for $ 1,500 apiece and our heifers for about the same price."↩68. Petitioner claims that he reported the expenses relating to his orange grove, cattle, and Ferrari activities on his returns for 1985 through 1988. The civil report that respondent prepared indicates that petitioner claimed expenses for those activities. However, we are unable to determine from the spreadsheets and petitioner's returns to what extent he claimed expenses for those activities, since the expenses are intermingled with expenses for other activities. Further, we are unable to determine whether any expenses, if identifiable, were in fact incurred in the activities that petitioner claims. Also, it appears from petitioner's supplement to petition that he is claiming expenses in greater amounts than the expenses claimed on his returns.↩69. A history of unexplained losses over an extended period is persuasive evidence of the absence of a profit motivation, especially where the taxpayer has substantial independent sources of income.  Allen v. Commissioner, 72 T.C. 28">72 T.C. 28, 34↩ (1979).70. Similarly, petitioner testified with respect to his claimed cattle business that "Basically, I never got up to the point that I was really producing stock, and so forth, that I would be selling into it and know myself."↩71. Sec. 274(d)provides for more stringent substantiation requirements with respect to "any traveling expense (including meals and lodging while away from home)", "for any item with respect to an activity which is of a type generally considered to constitute entertainment, amusement, or recreation, or with respect to a facility used in connection with such an activity", and for any expenses relating to passenger automobiles or any other property used as a means of transportation. See secs. 274(d)(4), 280F(d)(4)↩. We note that several of the expenses that petitioner claims as a deduction, he categorizes as "Automobiles" and "Meals & Entertainment". Also, he claims expenses relating to his collection of Ferraris.72. At trial, petitioner testified with respect to his cattle activity that he incurred expenses for 50-pound mineral blocks, hay, and health supplies such as injections, insect sprays, "and stuff". Petitioner's testimony regarding those expenses was general and not specific.↩73. Self-employment tax ($ 4,673) = Maximum amount subject to self-employment tax ($ 39,600) x Applicable percentage (.118).↩74. Self-employment tax ($ 5,166) = Maximum amount subject to self-employment tax ($ 42,000) x Applicable percentage (.123). ↩75. Self-employment tax ($ 5,387) = Maximum amount subject to self-employment tax ($ 43,800) x Applicable percentage (.123).↩76. Self-employment tax ($ 5,859) = Maximum amount subject to self-employment tax ($ 45,000) x Applicable percentage (.1302).↩77. See also  Hughes v. Commissioner, T.C. Memo. 1994-139 (describing sec. 6653(b)(2) as a burden-shifting provision). Sec. 6653(b)(2) was added to the Code by the Tax Reform Act of 1986, Pub. L. 99-514, sec. 1503(b), 100 Stat. 2742">100 Stat. 2742↩, and is effective for return due dates after Dec. 31, 1986.78. Our discussions in subs. A and B do not address fraudulent underpayments under sec. 6653(b)(2)↩ for the 1985 tax year. That addition is discussed separately in subs. C, infra.79. See appendix D for the items of income that respondent relies upon as clear and convincing evidence of an underpayment.↩80. See  Brodsky v. Comm'r, T.C. Memo. 2001-240↩ (taxpayer's failure to contest certain amounts of undisputed income determined by respondent establishes underpayment by clear and convincing evidence).81. Gain realized ($ 85,156) = Amount realized ($ 87,000) Basis ($ 1,844).↩82. Petitioner's financial statement dated Nov. 15, 1985, also reveals certain items of income receivable in petitioner's real estate business that could provide a likely source of the deposit. For example, the financial statement shows notes and mortgages receivable of $ 329,210, annual income from rentals of $ 40,000, and "Projected annual income from Monarch Realty" of $ 40,000.↩83. Total income proven of $ 555,888 less allowable deductions of $ 249,948 equals $ 305,940 in taxable income.↩84. Total income proven of $ 454,140 less allowable deductions of $ 300,864 equals $ 153,276 in taxable income.↩85. Total income proven of $ 1,009,798 less allowable deductions of $ 312,437 equals $ 697,361 in taxable income.↩86. Total income proven of $ 487,504 less allowable deductions of $ 350,461 equals $ 137,043 in taxable income.↩87. Petitioner reported gross income from his real estate business of $ 160,363 for 1985, $ 119,772 for 1986, $ 138,653 for 1987, and $ 61,921 for 1988. He claimed deductions for expenses of $ 152,481 for 1985, $ 115,634 for 1986, $ 94,434 for 1987, and $ 43,713 for 1988.↩88. Evidence of tax evasion for tax years which occur before and after the filing of the return for the particular tax year at issue is relevant on the issue of willfulness for that return.  United States v. Dixon, 698 F.2d 445">698 F.2d 445, 447↩ (11th Cir. 1983).89. The making of false and inconsistent statements to the Commissioner's revenue agents during the course of their investigation indicates fraudulent intent.  Solomon v. Commissioner, 732 F.2d 1459">732 F.2d 1459, 1462 (6th Cir. 1984) ("concealment of bank accounts from Internal Revenue agents is yet another sign indicating fraud), affg. T.C. Memo 1982-603">T.C. Memo. 1982-603;  Grosshandler v. Commissioner, 75 T.C. 1">75 T.C. 1, 20 (1980);  Kalo v. Commissioner, T.C. Memo. 1996-482 (taxpayer's failure to mention foreign bank accounts), affd. without published opinion 149 F.3d 1183">149 F.3d 1183↩ (6th Cir. 1998).90. This same lack of disclosure was apparent in the preparation of petitioner's 1977-1982 spreadsheets and tax returns involving Mr. Kelly and Mr. Brooks.↩91. Petitioner's concealment of the various real estate transactions was so prevalent that respondent's revenue agent was able to discover those transactions only by a search of various courthouse records in seven different counties.↩92. We also note that on petitioner's Forms 1040 for 1985-1988, he lists his address as "P.O. Box 383, Lake Lure, NC 28746". However, petitioner resided in Osceola County, Kissimmee, Florida, during the tax years at issue and at the time of filing his returns.↩93. Petitioner argues that his use of trusts is not evidence of fraud, since "the practice of owning property through nominees and trustees was widespread and common." We might agree that the use of trusts alone does not establish fraudulent intent; however, the use of trusts in combination with evidence of the concealment of assets and sale proceeds provides persuasive evidence of fraud. Further, it does not follow from the frequent use of the trust vehicle to hold property in Florida that petitioner's use of the trust vehicle was not fraudulent. Indeed, the use of trusts does not necessarily involve the same circumstances that exist with respect to petitioner's use, notably the failure to report income and the failure to file appropriate returns.↩94. It appears that petitioner raised this explanation of his failure to report income from his real estate transactions for the first time at trial. The record shows that he did not present this purported "misunderstanding" of tax free exchanges to respondent's revenue agent during the examination of his 1985-1988 returns, and his petition does not provide any allegation of a misunderstanding of the tax laws.↩95. The addition to tax for fraud under sec. 6653(b)(1)↩ applies to the entire underpayment for 1985, regardless of whether petitioner establishes that some portion of that underpayment is not attributable to fraud.96. Petitioner argues on brief that the Playboy magazine "could be used by Mr. Medlin as reading material for his real estate business", and although he concedes those are not allowable expenses, he suggests that such deductions are not indicative of fraud. We disagree. Those items are inherently personal and are items which we find someone in petitioner's position as a real estate businessman would have known were not deductible. In our view, claiming those deductions on a return shows a willingness to evade tax.↩97. We note that the civil report that respondent prepared indicates that certain expenses were disallowed with respect to petitioner's Ferrari automobile collection and his orange grove and cattle activities. However, since petitioner lumped the expenses relating to those activities into expenses relating to other activities, and reported them as car and truck and repair and maintenance expenses, we are unable to determine to what extent those items were claimed as deductions on his returns.↩98. Also, the Tax Court's stipulated decision with respect to petitioner's agreed deficiencies for 1977, 1978, 1979, 1981, and 1982, was entered before petitioner's filing of each of his returns for the 1985 through 1988 tax years.↩99. Since we hold that each of the tax years at issue is open under sec. 6501(c)(1), we do not address respondent's alternative argument that the 1988 assessment is not barred under sec. 6501(a), because the period of limitations specified in sec. 6501(e)(1) applies and was extended by sec. 7609(e)(1)↩.100. Respondent prepared on brief a reconciliation of items which are "in dispute" and concessions as to the adjustments in the statutory notice of deficiency. Appendix C of this opinion reflects the reconciliation schedules that respondent prepared and which petitioner stipulated in his answering brief. However, there are a number of income items, as we discuss in the opinion, that the parties represented were still in dispute but which petitioner does not contest on brief. Instead, he states: "In addition, any issues not raised in Petitioner's Brief are also conceded by Petitioner".↩