Frank H. and Marla C. Black - Page 20

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          bills, and kept this cash hoard inside a suitcase in an unlocked            
          closet in their residence.                                                  
               We decide whether a witness is credible on the basis of                
          objective facts, the reasonableness of the testimony, and the               
          demeanor of the witness.  Quock Ting v. United States, 140 U.S.             
          417, 420-421 (1891); Wood v. Commissioner, 338 F.2d 602, 605 (9th           
          Cir. 1964), affg. 41 T.C. 593 (1964); Dozier v. Commissioner,               
          T.C. Memo. 2000-255.  Having had the opportunity to observe                 
          petitioners and Mr. Black’s employee, Mr. Plexico, at trial, we             
          find their testimony regarding the existence of a cash hoard to             
          lack credibility.                                                           
               Petitioners had several bank and investment accounts and               
          made regular use of them.  We find it implausible that, as a                
          stockbroker and investment adviser, Mr. Black had accumulated               
          $500,000 in cash, and that he kept that cash in a closet at his             
               Respondent repeatedly requested that petitioners provide               
          information about petitioners’ cash on hand, but they refused to            
          provide such information.  Petitioners and their representatives            
          were aware that respondent was using the net worth method of                
          proof to compute petitioners’ taxable income for the taxable                
          years 1991 and 1992.  However, at no time during Agent McCarter’s           
          civil examination, or Agent O’Dell’s criminal investigation, did            

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