                         T.C. Memo. 2002-50



                      UNITED STATES TAX COURT



         JOSEPH D. AND MI JUNG PARK, ET AL.1, Petitioners v.
            COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos. 13778-99, 13784-99,      Filed February 21, 2002.
                 13789-99.


     F. Wallace Pope, Jr., Charles A. Samarkos, and Michael G.

Little, for petitioners.

     William R. McCants, for respondent.




     1
        Cases of the following petitioners are consolidated
herewith: John N. Park, docket No. 13784-99; and David S. and
Deborah Park, docket No. 13789-99.
                                  - 2 -

             MEMORANDUM FINDINGS OF FACT AND OPINION


     FOLEY, Judge:    By notices dated June 7 and 8, 1999,

respondent determined deficiencies, additions to tax, and

penalties relating to petitioners’ Federal income tax as follows:

            Joseph D. and Mi Jung Park, docket No. 13778-99

                                             Additions to Tax
     Year      Deficiency         Sec. 6651(a)(1)2        Sec. 6662(a)

     1992      $105,638               $26,407                 $21,128
     1993       157,576                39,394                  31,515

                     John N. Park, docket No. 13784-99

                                             Additions to Tax
     Year      Deficiency         Sec. 6651(a)(1)         Sec. 6662(a)

     1990      $321,294               $79,401                 $64,259
     1991       128,427                31,142                  25,685
     1992       118,697                 5,920                  23,739
     1993       654,754               163,360                 130,951

             David S. and Deborah Park, docket No. 13789-99

                                             Additions to Tax
     Year      Deficiency         Sec. 6651(a)(1)         Sec. 6662(a)

     1992      $100,630               $25,097                 $20,126
     1993       101,233                 --                     20,247
     1994       237,580                 --                     47,516


     The issues for decision are whether petitioners:           (1)

Underreported income during the years in issue, and (2) are

liable for section 6651 additions to tax and section 6662(a)

accuracy-related penalties.




     2
        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 -

                         FINDINGS OF FACT

     Petitioners resided in Florida at the time they filed their

petitions.

     The Reverend Yoon Sik Park had three sons, John, Joseph, and

David, all of whom were born in Korea.   During the years in

issue, Joseph and David Park were married to Mi Jung and Deborah

Park, respectively.   Petitioners immigrated to Maryland and

became naturalized U.S. citizens in the 1980s.   Petitioners, led

by the eldest brother, John, moved to Florida and attempted to

establish themselves as businessmen.   Using funds given to them

by their mother, John bought two strip malls.

     At all times relevant, Reverend Park has been the senior

pastor of the Pyung Kang Church in Korea, which had 65,000

members.   After hearing several of Reverend Park’s sermons in

1987, Mr. Kaharudin Latief and Mr. Ferry Tandiono became

Christians.

     Mr. Latief and Mr. Tandiono were two wealthy Indonesian

businessmen.   Mr. Latief has extensive business holdings and is

heir to an immense family fortune worth hundreds of millions of

dollars.   From 1967 to 1981, the Latief family owned the

exclusive license in Indonesia to operate casinos, the lottery,

and greyhound racing.   As a young adult, Mr. Latief’s lifestyle

revolved around exotic sports cars, perpetual partying, and

international jet-setting.   He would often accompany his father
                                - 4 -

on trips to Las Vegas, Nevada, where it was not uncommon for them

to spend in excess of $6 million in a few days.      Mr. Latief’s

father gave him $50 million when he graduated from college and a

hotel in Perth, Australia, upon the birth of Mr. Latief’s first

son.    Despite this extravagant lifestyle, Mr. Latief believed

that, prior to his conversion to Christianity, his life was

aimless.    Similarly, Mr. Tandiono believed that, prior to his

conversion to Christianity, his priorities concerning family,

work, and religion were misplaced.      Because Reverend Park led

them to Christianity, Mr. Latief and Mr. Tandiono felt indebted

to him.    Since their conversion, they have each become elders in

Reverend Park’s congregation and have donated substantial funds

to help establish several other churches.

       In 1988, when John told Reverend Park that he was having

difficulties establishing a successful business, Reverend Park

told him to meet with Mr. Latief.    Similarly, in 1991, when David

Park wanted to establish his own businesses, Reverend Park told

him to contact Mr. Tandiono.    Between 1990 and 1994, Mr. Latief

and Mr. Tandiono transferred, via traveler’s checks and wire

transfers, over $9 million to petitioners.      Petitioners used

these funds to establish at least 13 businesses, all of which

failed.    During the years in issue, petitioners’ family and

friends in Korea also gave them smaller amounts for various

personal uses (e.g., marriage, childbirth, etc.).
                                - 5 -

     While petitioners felt a moral obligation to repay these

funds, neither Mr. Latief nor Mr. Tandiono ever asked for, or

expected, repayment or any interest in petitioners’ businesses.

John Park met with Mr. Latief on numerous occasions during the

years in issue.   During those meetings, Mr. Latief informed John

that he did not expect repayment.   Mr. Latief was insulted and

angry when John insisted on paying him back with interest, and

told John “this was not a business transaction.”   Similarly, when

David Park met with Mr. Tandiono, Mr. Tandiono did not want

repayment, because he intended only to help David.   In addition,

Mr. Tandiono believed it was inappropriate to require repayment

from someone experiencing financial difficulties and that God

would bless him for helping someone in need.

     Respondent was suspicious of the inconsistencies between

petitioners’ lifestyles and their reported income and believed

petitioners were “skimming” money from several of their cash-

intensive businesses or from a Presbyterian church they

established.    Initially, petitioners lied to respondent about the

source of their funds, saying they had received the funds from

their father.   Respondent was not satisfied with this response.

Petitioners eventually informed respondent that Mr. Latief and

Mr. Tandiono provided them with the funds.   Respondent’s Criminal

Investigation Division found no evidence of “skimming” and could

not disprove that Mr. Latief or Mr. Tandiono was the source of
                                  - 6 -

petitioners’ funds.      Respondent believed, however, that the funds

came from a taxable source.

     Respondent reconstructed petitioners’ incomes using the cash

expenditures method and determined unreported income relating to

the years in issue of $7,502,253 for John Park, $830,321 for

Joseph and Mi Jung Park, and $1,310,895 for David and Deborah

Park.     Respondent also determined that John Park had $10,155 of

unreported income from concert promotion activities, and that all

petitioners were liable for section 6651(a) additions to tax for

failure to timely file and section 6662(a) accuracy-related

penalties.

                                 OPINION

         Gross income includes all income from whatever source

derived.     Sec. 61.   Respondent’s determination is generally

presumed correct, and petitioners have the burden of proof.3

Welch v. Helvering, 290 U.S. 111, 115 (1933).

     Petitioners contend that respondent’s determinations

relating to unreported income are arbitrary and not entitled to a

presumption of correctness.      We disagree.   Connecting petitioners

to the funds that form the basis of the deficiency is sufficient

to give petitioners the burden of proving the determination

erroneous.     Schad v. Commissioner, 87 T.C. 609, 620 (1986), affd.


     3
          Sec. 7491 is not applicable to this case.
                                 - 7 -

without published opinion 827 F.2d 774 (11th Cir. 1987).

Petitioners deposited millions of dollars in their bank accounts

while reporting losses from cash-intensive businesses.    We

conclude that respondent’s deficiency determination was not

arbitrary.    Accordingly, the presumption of correctness applies.

     Petitioners, however, have established that the funds

attributed to petitioners by respondent’s income reconstruction

were from nontaxable sources.    Petitioners and their witnesses,

particularly Mr. Tandiono and Mr. Latief, adequately explained

the sources, nature, and amounts of the transfers to petitioners.

The funds, transferred from Mr. Tandiono and Mr. Latief to

petitioners, were gifts.    See Commissioner v. Duberstein, 363

U.S. 278, 285 (1960).   Mr. Tandiono’s and Mr. Latief’s

disinterested generosity was inspired by their gratitude towards

petitioners’ father, Reverend Park, who led Mr. Tandiono and Mr.

Latief to Christianity.    Family members also sent funds to

petitioners as gifts.   Respondent failed to present any rebuttal

evidence and chose instead to rely solely on the contention that

petitioners, their witnesses, and their explanations were not

credible.    To the contrary, petitioners’ testimony, and that of

their witnesses, was credible.    We conclude that there is no

deficiency in income tax, nor section 6662(a) penalty relating to

this issue.
                                 - 8 -

     Section 6651(a)(1) imposes an addition to tax for failure to

file a required return on the date prescribed, unless it is shown

that such failure is due to reasonable cause and not willful

neglect.   Petitioners have not shown that such failure to file by

the prescribed date was due to reasonable cause and not willful

neglect.   Accordingly, petitioners are liable for the section

6651 addition to tax.   John Park, however, did not contest

respondent’s determinations relating to a $10,155 income

understatement from a concert promotion business.      Thus, the

deficiency and section 6662 penalty concerning this issue are

sustained.   Welch v. Helvering, supra at 115.

     To reflect the foregoing,



                                             Decisions will be entered

                                         under Rule 155.
