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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
house.
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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