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121 (1954); i.e., that the opening net worth be established with
reasonable certainty.
We now turn to the alternative branch of the second prong of
the Holland test, pursuant to which respondent must show a likely
source of the unreported income or negate possible sources of
nontaxable income.
Whether or not respondent has shown a likely source of
petitioners' unreported taxable income, proof of a likely source
of income is not a prerequisite to use of the net worth method
when possible sources of nontaxable income are negated. United
States v. Massei, 355 U.S. 595 (1958); United States v.
Mastropieri, 685 F.2d 776, 785 (2d Cir. 1982). Petitioner,
himself, denied receipt of any gifts, inheritances, or insurance
settlements during the years in issue. Respondent investigated
petitioners' banking activities and found no evidence of
nontaxable income.
Respondent must also establish that a reasonable
investigation of leads to possible sources of nontaxable income
has been conducted. Holland v. United States, supra at 135-138;
United States v. Mastropieri, supra at 785. We have rejected
petitioner's cash hoard claim. Petitioners made no other claims
of nontaxable sources of income. Once respondent has explored
the leads available to her and established a prima facie case,
she has met this burden. Petitioner "remains quiet at his
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