Opinion ID: 492452
Heading Depth: 3
Heading Rank: 2

Heading: Beginning Net Worth or Cash on Hand.

Text: 20 In a cash expenditures case, the government must also prove to a reasonable certainty (i) expenditures during the period in question and (ii) the opening net worth of the taxpayer, including cash on hand. Citron, 783 F.2d at 315 (citing Bianco, 534 F.2d at 504). In contrast to a tax evasion case prosecuted under the net worth method, however, the government need not prepare a formal net worth statement. Id. at 315, 316. Rather, accurate inclusion of diminution of resources serves the function of enabling the jurors to determine if expenditures were financed by liquidation of assets, depletion of a cash hoard, or unreported income. Id. at 315 (citation omitted); see Taglianetti v. United States, 398 F.2d 558, 565 (1st Cir.1968), aff'd, 394 U.S. 316, 89 S.Ct. 1099, 22 L.Ed.2d 302 (1969). 6 21 The government has this burden whether it is prosecuting an individual for tax evasion for one year or successive years. In the latter case, however, the government has the duty only to establish the opening cash on hand balance for the beginning year; the income received less disbursements paid during that year will establish the opening funds for the next year, and so on. United States v. Marshall, 557 F.2d 527, 530 (5th Cir.1977). Furthermore, when an individual is charged with tax evasion in successive years, the government has the added responsibility of showing diminution of resources for each year under investigation in order to prove that the expenditures in each year were not made from other nontaxable sources of income such as gifts, loans, or bequests. Id. 22 Caswell contends that the government failed to meet this burden because it did not present any solid evidence of his cash on hand or diminution of resources for the years under investigation. A close examination of the record in view of the applicable law convinces us otherwise. 23 In Taglianetti, 398 F.2d 558, the government prosecuted the defendant for successive years of tax evasion, basing its case on the cash expenditures method of proof. There, the First Circuit held that the government's evidence at trial was sufficient to allow the jury an intelligent determination of the single relevant issue: whether any expenditures found to be in excess of reported income can be accounted for by assets available at the outset of the prosecution period or non-taxable receipts during the period. Taglianetti, 398 F.2d at 565-66 (citing United States v. Johnson, 319 U.S. 503, 63 S.Ct. 1233, 87 L.Ed. 1546 (1943)). Although the government did not inform the jury of the dollar value of the defendant's assets comprising his opening net worth, the government did present evidence of his opening cash on hand and assets acquired or disposed of during the years in question. Id. at 565. 24 Similarly, the government here, while not presenting formal net worth statements, did inform the jury of the currency available to Caswell at the beginning of each year. 7 Through the testimony of IRS Agent Fox, the government also informed the jury of Caswell's non-liquid assets, such as automobiles, which were either bought or sold during the years in question. Finally, Fox testified that the government's extensive investigation of bank records, prior years' tax returns, and the like revealed no other possible nontaxable sources of income, other than a cash gift that it included in Caswell's opening cash balance, to explain Caswell's large cash expenditures during the period under investigation. We believe that this evidence, strikingly similar to the type found sufficient in Taglianetti, was sufficient to prove Caswell's net worth and cash on hand and to allow the jury to infer that there were no other possible sources of income to explain Caswell's expenditures. 25 Further, although Caswell asserts that this evidence was insufficient, he did not introduce any evidence to rebut the government's findings in this area. 8 It is well-settled that once the government has introduced evidence from which the jury could conclude with reasonable certainty that no [nontaxable] assets existed, the defendant remains silent at his own peril. Bianco, 534 F.2d at 506 (citing, among other cases, Holland v. United States, 348 U.S. 121, 138-39, 75 S.Ct. 127, 136-37, 99 L.Ed. 150 (1954)). 26