Opinion ID: 538863
Heading Depth: 3
Heading Rank: 1

Heading: The Prosecution and Defense Theories

Text: 8 At trial, the government called IRS Agent Dennis Czurylo to give expert testimony about the cash method of determining unreported taxable income. In essence, the cash method compares cash expenditures with known cash sources. Agent Czurylo testified that the method first requires that all cash expenditures be determined and added together. Then, taxable and nontaxable cash sources are added together. These sources would include any cash accumulated and on hand at the beginning of the tax period in question that the taxpayer spends during the tax period (often called a cash hoard). If cash expenditures exceed cash sources during the period in question, it is inferred that the excess amount is unreported income. Tr. at 1787. 1 9 Mr. Toushin's defense was that he had built up a cash hoard of undeposited cash prior to 1980, which accounted for the increase in expenditures over reported income in 1980 to 1982. Susan Toushin, Mr. Toushin's former wife, testified that in the summer of 1979 Mr. Toushin showed her the inside of his home safe, which was filled with currency. She also testified that Mr. Toushin told her that there was $200,000 in cash in the safe. 2 Furthermore, defense counsel introduced testimony of a tax expert who based his calculation on the assumption that Mr. Toushin began 1980 with a cash hoard of $175,000. Tr. at 2265-66. 3 10 The government countered this defense with two theories. First, Agent Czurylo testified that Mr. Toushin had little or no cash at the beginning of the tax period he examined (1980 to 1982). He based this conclusion on several factors: 1) Mr. Toushin borrowed money from relatives in 1975 and 1976; 2) he worked as a janitor in 1976; 3) he obtained no loans from his relatives after 1976; 4) his checking account was overdrawn in 1978 and 1979; 5) he had about $75 in his checking account at the end of 1979; 6) he closed his savings account in 1979; 7) he borrowed money from his corporation (Entertainment & Amusement, Inc.) in 1979; 8) he made minimum payments on his credit cards in 1978 and 1979; 9) he failed to make timely payments on his credit cards in 1978 and 1979; 10) he paid for a plane ticket in 1979 in installment payments; 11) he was denied a loan in 1979 after furnishing a financial statement that did not list any cash as an asset; 12) he borrowed money from his in-laws in 1979 to purchase a condominium; and 13) he failed to repay family loans through December of 1979. Tr. at 1850-54. 11 Second, Agent Czurylo testified that any amount already in Mr. Toushin's safe at the beginning of the tax period in question was not income to Mr. Toushin that was reportable in earlier tax years. He testified that the money kept by the owner of a wholly owned business does not become his income, as opposed to that of the business, until the owner converts it to his personal use. Tr. at 1830. 4