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non-taxable receipts, and cash on hand may establish
the existence of unreported income. [United States v.
Citron, 783 F.2d 307, 310 (2d Cir. 1986).]
Formal opening net worth statements are not required
provided the evidence "'shows the extent of any contribution
which beginning resources or a diminution of resources over time
could have made to expenditures.'" Petzoldt v. Commissioner,
supra at 694-695 (quoting Taglianetti v. United States, 398 F.2d
558, 565 (1st Cir. 1968), affd. 394 U.S. 316 (1969)). To carry
his burden of proof, petitioner must show that the expenditures
in question were made from some nontaxable source of funds, such
as loans, gifts, or assets on hand at the beginning of the
period. DeVenney v. Commissioner, supra at 931. Alternatively,
petitioner may show that the expenditures were allowable business
expenses, in which case they would offset the income presumed to
have been received by petitioner. Curry v. Commissioner, T.C.
Memo. 1991-102.
Petitioner argues that the expenditures identified by
respondent were business expenses of Pieces of Eight or were
loans or repayments made by it to himself or other related
businesses and that any loans Pieces of Eight made were repaid.
Petitioner relies on his testimony and charge account statements
to establish his claim with respect to the business expenses.
However, we found petitioner’s testimony vague and replete with
unsupported conclusions, and, based on our observation of his
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