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the figures reported on their tax returns (a matter that we have
been unable independently to verify), such a circumstance would
not establish the accuracy of the business records or foreclose
respondent from using the net worth method to test their
trustworthiness. See Holland v. United States, supra at 132
(even if no false entries are detected, the taxpayer’s books may
be “more consistent than truthful”); Foster v. Commissioner,
supra at 903.
Petitioners rely on Talley v. Commissioner, 20 T.C. 715
(1953), for the proposition that, before utilizing the net worth
method, respondent must demonstrate that a taxpayer’s books and
records do not accurately reflect the taxpayer’s income.
Petitioners’ reliance on Talley is misplaced. Talley predates
Holland v. United States, supra, which rejected such a rule. See
Shelhorse v. Commissioner, T.C. Memo. 1980-98.
B. Petitioners’ Alleged “Leads” as to Nontaxable Sources
Petitioners contend that under Holland and its progeny,
respondent was required, in using the net worth method, to
exhaust all leads negating possible sources of nontaxable income.
Petitioners contend that they furnished respondent certain leads
that respondent failed to pursue, thus rendering his
determinations arbitrary.
In some cases, such as fraud and criminal cases, the
Commissioner may be expected to investigate leads of nontaxable
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