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from nontaxable sources.28 We consider seriatim the components
of the category of cash from nontaxable sources.
(a) The Newman Property.--Michael sold the Newman property
on November 15, 1993. The net proceeds were $31,307.06.
Respondent, relying on Klimkiewicz’s testimony based on her notes
as to what Sandra said at a meeting during the audit, contends
that petitioners spent $2,000 of these net proceeds in 1993, had
$29,307 left at the beginning of 1994, and spent all this $29,307
in 1994. Petitioners deny the correctness of Klimkiewicz’s notes
on this matter and “suggest that at most $1,600 * * * was spent
during 1993. * * * For the sake of computing numbers only, the
Petitioners will assume the amount of $1,600.” As a result,
petitioners contend that the correct amount for this component is
$29,707. Both sides agree that, by the end of 1994, petitioners
spent all that remained of the Newman property proceeds.
Taking into account the conflicting testimony, and the fact
that this testimonial conflict is solely as to what Sandra said
to Klimkiewicz in 1996 as to Sandra’s 1996 estimate of what
petitioners spent out of this source in 1993, we conclude (and we
28 Respondent refers to this category of items as
“nontaxable undeposited cash”. (Emphasis supplied.) Yet, for
1994 respondent would allow $39,507 to be subtracted, even though
respondent would have included only $31,766 of cash expenditures.
Thus, respondent appears to have implicitly accepted petitioners’
contentions (and Sandra’s testimony) that, at least in 1994,
petitioners took money from some cash storage and, at least to
the extent of $7,741 ($39,507 minus $31,766), deposited that
money into the bank accounts.
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