Opinion ID: 357064
Heading Depth: 2
Heading Rank: 1

Heading: Opening Cash on Hand

Text: 12 As in a net-worth case, Holland v. United States, supra, 348 U.S. at 132-135, 75 S.Ct. at 134-135, it is essential for the government to establish an accurate cash on hand figure for the beginning of each taxable year. See United States v. Marshall, supra, 557 F.2d at 530. If the taxpayer's deposits or expenditures during any taxable year came from a safety deposit box or a secret cache, they are not 'income' when taken from their storage place and deposited in a checking account or when spent. United States v. Frank, 3 Cir. 1957, 245 F.2d 284, 287, cert. denied, 1957, 355 U.S. 819, 78 S.Ct. 25, 2 L.Ed.2d 35. 13 Here, the government initially had no cash on hand figure for the start of 1969. Dr. Boulet had informed the agents, and they confirmed with the bank, that he periodically converted currency of small denominations into $100 bills, which he did not immediately deposit. Dr. Boulet himself said he had kept currency in a safe in his mother's home, across the street from his office, until he accumulated $3000 to $4000. He would then convert the money into $100 bills, and keep them in a safety deposit box in the bank, a block from his office. He had no record of the amount of cash he had on hand on January 1, 1969. The government attempted to establish how much cash Dr. Boulet had on January 1, 1969, by taking as a starting point the year the taxpayer began medical practice, 1962. The taxpayer had made the statement that he had at most $5000 in cash then. The agents then proceeded to analyze the sources of Dr. Boulet's funds and the uses to which he applied them during the 1962-1968 period, in an effort to establish the amount of cash he had on hand at the end of the calendar year 1968. See United States v. Marshall, supra. Its analysis reflected an anomalous negative cash on hand figure on December 31, 1968; if the taxpayer had the assets he owned, and no greater liabilities than he owed, he must have had over $14,000 in cash on hand not reflected either in bank accounts or other places that the investigation had revealed. Moreover, the investigation showed that, on January 2, 1969, Dr. Boulet purchased a bank cashier's check for $15,000 with cash from a source that could not be identified. The investigator therefore concluded that Dr. Boulet had $15,000 in cash on hand (in a bank safety deposit box or some other secret place) on January 1, 1969. 14 Dr. Boulet does not dispute the logic of the government's analysis, but its accuracy; he attempted to impeach this on the basis that the government failed to discover the source of the $15,000 and by its apparently inexplicable conclusion that there was negative cash on hand. He argues that the investigation simply was not pursued far enough. He had in fact a much larger amount in cash at the time, not reflected in bank accounts or other places that maintain records. It was this cash that was deposited in 1969-1972, and thus the source of the deposits in the taxable years was not income for those years, but, as he argues with apparent candor, unreported income from the period 1962-1968; prosecution for these years is, of course, barred by the statute of limitations. 15 During the investigation, the taxpayer told the IRS agents he had $30,000 to $50,000 in cash on hand on December 31, 1968. Because the IRS study credited him with having $15,000 on hand, this amounted to a claim that he had $15,000 to $35,000 more than the amount credited to him. 16 The government showed, however, that, from 1966 to 1968, Dr. Boulet consistently deposited cash into a special bank account from which he eventually withdrew funds to build a house. Dr. Boulet had told the agents that he made frequent purchases of savings bonds, certificates of deposit and cashier's checks, and they verified this. In later years he also accumulated savings in a homestead association account that would bear interest, and he purchased interest-bearing bank certificates of deposit from time to time. In 1969 he built a home, and paid for it without executing a mortgage. Although he had said the home cost him about $80,000, he disbursed about $150,000 mostly from the special bank account, but also including $40,000 that he withdrew from interest-bearing accounts. 17 This evidence cumulatively tended to show that Dr. Boulet accumulated $100 bills, and that he also periodically invested the accumulation. It tended further to show he was not likely to have maintained a non-interest bearing cash hoard sufficient to account for the unreported income that he was alleged to have concealed (all represented by bank deposits in excess of reported income): a total in excess of $124,000, consisting of $31,600 in 1969, almost $53,000 in 1970, over $32,000 in 1971; and over $8,700 in 1972. As the trial court found in denying a motion for a judgment of acquittal, his cash on hand was in a constant state of flux because he methodically put his money to work earning interest; it was therefore at least a permissible conclusion that, whatever non-interest bearing cash he may have secretly kept, he would have spent this before depleting an income-producing account to build his home in 1969, the first year under investigation. 18 The prosecution was not required to prove the opening cash figure with mathematical exactitude. The government's proof was reasonably certain; it led to the conclusion that, when Dr. Boulet bought a certificate of deposit for $15,000 on January 2, 1969, he invested all of his cash on hand. The government investigated all leads furnished by the taxpayer. United States v. Slutsky, supra, 487 F.2d at 843; United States v. Ramsdell, 10 Cir. 1971, 450 F.2d 130, 133; United States v. Stein, 7 Cir. 1971, 437 F.2d 775, 778, cert. denied, 1971, 403 U.S. 905, 91 S.Ct. 2205, 29 L.Ed.2d 680; see also, United States v. Marshall, supra. 19 There is a distinction between proof of cash on hand sufficient to be submitted to the jury and proof enough to convict. As a matter of law the court must be satisfied in a circumstantial evidence type case that the opening cash balance is established with reasonable certainty. If this is done, then the further question remains whether guilt has been proved beyond reasonable doubt. The jury was correctly instructed on its duty. It was not obliged to credit the proof. The evidence was, however, sufficient to go to the jury free from the taint of inadequate investigation; it satisfied the standard of reasonable certainty that safeguards the accuracy of the circumstantial proof. United States v. Newman, 5 Cir. 1972, 468 F.2d 791, 795; cert. denied, 1973, 411 U.S. 905, 93 S.Ct. 1527, 36 L.Ed.2d 194.