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notice something's up if her husband suddenly starts bringing in
so much money that their standard of living suddenly becomes much
better than before.
In many cases that we have decided in the Commissioner's
favor, families were spending three or four or even six times the
income they reported during the years in question.4 But that was
not the case with the Haltoms. During the years at issue, their
lifestyle did not change that much. They did pay off a mortgage,
make improvements to their home, buy new furniture, and landscape
their yard. Jerry also had a membership in a country club. Yet
while these are large expenses--over $60,000 between 1990 and
1992--this spending was in line with their reported income for
the years at issue. When we exclude the car payments, which
Linda believed the Taylor Company was paying,5 the expenses that
the Haltoms paid from 1990 through 1992 exceeded their reported
income by less than $30,000.6 Given that Jerry paid many of the
4 Barranco v. Commissioner, T.C. Memo. 2003-18; Hammond v.
Commissioner, T.C. Memo. 1990-22 (two or three times as much),
affd. without published opinion 938 F.2d 185 (8th Cir. 1991);
Ayer v. Commissioner, T.C. Memo. 1989-614 (three times).
5 See Ferrarese v. Commissioner, T.C. Memo. 1993-404 (Court
excluded cost of entertainment when wife believed tickets were
provided by husband’s employer), affd. without published opinion
43 F.3d 679 (11th Cir. 1994).
6 From 1990-92, we calculate that Jerry had about $104,000
of salary directly deposited into the joint checking account.
The IRS calculated that from 1990 to 1992, Jerry spent about
$140,000 on family expenses from the five accounts to which Linda
(continued...)
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