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C. Whether: (1) The Absence of Deemed Facts, or (2) the
Finding by the U.S. Court of Appeals for the Third Circuit
Relating to Petitioner’s Deposition Alters Our Decision
Relating to the Deficiencies or the Net Worth Method for
1976 and 1977
1. Deemed Facts
We did not consider the deemed facts in our prior opinion
with respect to the deficiencies, the net worth method, or any
issue other than fraud. Estate of Spear v. Commissioner, T.C.
Memo. 1993-213 (slip op. at 29-30, 33, 55-56). Thus,
the decision of the Court of Appeals in Estate of Spear v.
Commissioner, supra, that we may not consider the deemed facts,
affects only our findings and conclusions relating to fraud. We
decide the effect of that opinion on our fraud finding below at
paragraph D.
2. Jeanette Spear's Deposition
a. Net Worth Method
Respondent used the net worth plus expenditures method to
determine that petitioners had unreported income in 1975, 1976,
and 1977. As part of that determination, respondent concluded
that petitioners had no cash on hand on December 31, 1974.
An essential condition in net worth cases is that the
Commissioner establish with reasonable certainty an opening net
worth to serve as a starting point from which to calculate future
increases in the taxpayer’s assets. Holland v. United States,
348 U.S. 121, 132 (1954). Although Holland is a criminal case,
it also applies to use of the net worth method in civil tax
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