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increase (or decrease) in the taxpayer's net worth over a
12-month period, adding to it his nondeductible expenses
for that year, and subtracting from that sum any amount
attributable to nontaxable sources. McGarry v. United
States, supra at 864. A net worth increase computed for a
given year creates an inference of taxable income, if the
Commissioner shows a likely source of unreported income or
negates possible nontaxable sources. E.g., United States
v. Massei, 355 U.S. 595 (1958); Manzoli v. Commissioner,
supra at 104. The Commissioner must clearly and accurately
establish the opening net worth of the taxpayer by
competent evidence. See Manzoli v. Commissioner, supra at
104; United States v. Smith, 890 F.2d 711, 713 (5th Cir.
1989); Thomas v. Commissioner, 232 F.2d 520, 524 (1st Cir.
1956), revg. and remanding T.C. Memo. 1955-46.
In the instant cases, petitioners did not provide any
books or records from which their tax liability could be
computed, and respondent chose to reconstruct petitioners'
income using the net worth method. As the starting point
for the net worth computations, respondent used $251,597,
the net worth reported on the financial statement that they
submitted on August 16, 1976, to the Broadway National Bank
in connection with their loan application to purchase the
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