CALCRIM No. 2842

In this case, the People are using what is called the net worth method to

try to prove that the defendant had unreported taxable income. I will

now explain the net worth method.

On any given date, a person’s net worth is the value of everything that

person owns minus the value of all that person’s debts and financial

obligations. It is the difference between what a person owns and what

that person owes. The value of any item that a person owns is measured

by what it was worth when it was acquired, not its current market

value.

If the People prove that the defendant’s net worth increased during

<insert year alleged>, then you may but are not required to

conclude that the defendant received money or property during that

year.

In order to prove that the money or property received was taxable

income, the People must also prove that: (1) the defendant had one or

more sources of taxable income, and (2) the money or property the

defendant received during the year did not come from nontaxable

sources. Nontaxable sources of income include gifts, inheritances, loans,

or redeposits or transfers of funds between bank accounts.

If the People have proved that: (a) the defendant’s net worth increased

during <insert year alleged>, (b) the defendant had one or

more sources of taxable income, and (c) the money or property the

defendant received during that year did not come from nontaxable

sources, then you may but are not required to conclude that the money

or property received was taxable income to the defendant. If you have a

reasonable doubt about whether the People have proved (a), (b), or (c),

you must find that the People have not proved under the net worth

method that the defendant had unreported taxable income.

In order to prove that the defendant had unreported taxable income

[using the net worth method], the People must also prove that the

defendant’s net worth increased by an amount that was substantially

greater than the income that the defendant reported on (his/her) tax

return for <insert year alleged>.

[There is another factor you may consider in deciding whether the

People have proved that the defendant had unreported taxable income

under the net worth method. If the People have proved beyond a

reasonable doubt that: (1) during the year, the defendant spent money in

ways that did not change (his/her) net worth at the end of the year and

(2) those expenditures would not be valid tax deductions, then you may

but are not required to conclude that the defendant received money or

property during the year. If the People also prove beyond a reasonable

doubt that the money or property received did not come from

nontaxable sources, then you may but are not required to conclude that

the money or property was also taxable income. If you have a reasonable

doubt about whether the People have proved any of these factors, you

may not take the expenditures into account in applying the net worth

method.]

In order to rely on the net worth method of proving income, the People

must prove the defendant’s net worth at the starting point with

reasonable certainty. Here the starting point is January 1,

<insert year alleged>. The People are not required to prove the exact

value of each and every asset the defendant owned at the starting point.

However, the People must prove beyond a reasonable doubt that all the

assets the defendant owned at the starting point were not enough to

account for any proven increase in (his/her) net worth during the year.

In deciding whether the defendant’s net worth at the starting point has

been proved with reasonable certainty and whether the People have

proved that any money or property the defendant received during the

year did not come from nontaxable sources, consider whether law

enforcement agents sufficiently investigated all reasonable “leads”

concerning the existence and value of other assets and sources of

nontaxable income. Law enforcement agents must investigate all

reasonable leads that arise during the investigation or that the defendant

suggests regarding assets and income. This duty to reasonably investigate

applies only to leads that arise during the investigation or to

explanations the defendant gives during the investigation. Law

enforcement agents are not required to investigate every conceivable

asset or source of nontaxable funds.

If you have a reasonable doubt about any of the following:

A. Whether the investigation reasonably pursued or refuted the

defendant’s explanations or other leads regarding defendant’s

assets or income during the year,

B. Whether the People have proved the defendant’s net worth at the

beginning of <insert year alleged> to a reasonable

degree of certainty,

OR

C. Whether the People have proved that any increase in the

defendant’s net worth[, together with any nondeductible

expenditures the defendant made during the year,] was

substantially more than the income that the defendant reported

on (his/her) tax return for <insert year alleged>,

TAX CRIMES CALCRIM No. 2842

then you must find that the People have not proved under the net worth

method that the defendant had unreported taxable income.

[If, on the other hand, you conclude that the defendant did have

unreported taxable income, you must still decide whether the People

have proved all elements of the crime[s] charged [in Count[s]].]

New January 2006