- 10 -
returned on deposits, checks written to "cash," * * *,
cash contents of safe deposit boxes, in addition to
money on hand at the beginning of the taxable year.
The expert then adds cash received from nontaxable
sources of income--including loans, advances from
credit cards, gifts, and inheritances--to cash
generated by sources and compares this total to the
amount of purchases and services for which the taxpayer
paid cash. If the cash expenditures exceed the
sources, the tax expert infers that the taxpayer failed
to report income. [Citations omitted.]
12 Although the term "cash" is often intended to
include purchases made with checks, the cash method, as
defined by the government, does not include checks as a
type of cash. * * *
See also 1 Fink, Tax Fraud, sec. 17.03[7], at 17-30 (1998).
Utilizing this method, respondent determined that petitioner
had unreported income of $59,411, $57,656, and $43,857 in 1980,
1981, and 1982, respectively.
B. Petitioner's Cash On Hand as of January 1, 1980
Petitioner does not challenge respondent's authority to use
the cash method. Rather, petitioner contends that respondent
incorrectly used the cash method because respondent failed to
account for petitioner's beginning cash on hand.
Respondent determined petitioner had no cash on hand as of
January 1, 1980. Petitioner claims he had a cash hoard of at
least $80,000 in his home safe as of that date.
Petitioner admitted in his guilty plea that he had
unreported skimmed income from the Bijou in 1980 totaling
$59,411. This figure was computed based on cash on hand of $0 as
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