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Hoffman v. Commissioner, 298 F.2d 784, 786 (3d Cir. 1962), affg.
in part T.C. Memo. 1960-160. Under that method, the excess of a
taxpayer’s cash expenditures during a taxable period over his or
her known sources of income for that period is taxable income,
unless the taxpayer establishes that the expenditures were made
from a nontaxable source of funds. DeVenney v. Commissioner,
85 T.C. 927, 930 (1985). Petitioners contend that the excess
expenditures are attributable to two nontaxable sources of funds;
i.e., (1) cash on hand as of January 1, 1993, and (2) loans and
gifts from family members.
As to the first source, petitioners argue that they had a
cash hoard of approximately $16,000 as of January 1, 1993.
Petitioners contend that this hoard remained from the settlements
received in 1990 by Messrs. Welch and Ruth. We are unpersuaded
that this is so. Instead, the totality of the evidence
establishes that little, if any, of the settlement funds remained
as of January 1, 1993. Whereas petitioners testified to the
contrary, we find that testimony uncorroborated and questionable
and decline to rely on it. Neonatology Associates P.A. v.
Commissioner, 115 T.C. 43, 87 (2000); see also Cannon v.
Commissioner, 533 F.2d 959, 961 (5th Cir. 1976), affg. Ash v.
Commissioner, T.C. Memo. 1974-219.
Nor does the record persuade us that petitioners received
the alleged loans and gifts from family members. In light of the
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