11th Cir. Pattern Jury Instr. (Criminal) O107.4

In this case the Government relies upon the “cash -expenditures method” of

proving unreported income.

Under this method of proof, if a taxpayer's expenditures for a particular

taxable year plus any increase in net worth are more than the total of the taxpayer's

reported income plus nontaxable receipts and available cash at the beginning of the

year, then the taxpayer has understated [his] [her] income.

The “cash -expenditures method” requires examining the Defendant's

expenditures during the taxable year and examining the Defendant's “net worth” at

the beginning and at the end of that year.

A person's “net worth” is the difference between the person's total assets and

total liabilities on a given date. In other words, it is the difference between what the

person owns and what the person owes. Until something is sold, the value of what

the person owns is based on cost rather than on any increase in market value.

If the evidence proves beyond a reasonable doubt that the Defendant's net

worth increased during a taxable year, then you may infer that the Defendant

received money or property during that year.

And if the evidence also proves that nontaxable sources don’t account for

the increase in net worth, then you may further infer that the money and property

received were taxable income to the Defendant.

In addition to the matter of the Defendant's net worth, if the evidence proves

beyond a reasonable doubt that the Defendant spent money during the year on

living expenses, taxes, and other expenses that didn’t add to the Defendant's net

worth by the end of the year, then you may infer that those expenditures also came

from funds received during the year.

And, again, if the evidence proves that those funds didn’t come from

nontaxable sources, and those expenses would not be deductible on the

Defendant’s tax return, then you may further infer that those funds were also

taxable income.

The “net worth method” of proving unreported income involves comparing

the Defendant's net worth at the beginning of the year and the Defendant's net

worth at the end of the year. So the result cannot be accepted as correct unless the

starting net worth is reasonably accurate.

If it’s proved that the assets owned by the Defendant at the starting point

were insufficient, by themselves, to account for the later increases in the

Defendant's net worth, then the proof does not have to show the exact value of the

assets owned at the starting point, only the reasonably certain value.

So, if you decide that the evidence doesn’t prove with reasonable certainty

what the Defendant's net worth was at the beginning of the year, you must find the

Defendant not guilty.

To decide whether the Defendant’s claimed net worth at the starting point is

reasonably accurate, you may consider whether Government agents sufficiently

investigated all reasonable “leads” suggested to them by the Defendant or that

otherwise surfaced during the investigation concerning the existence and value of

other assets.

If you find that the Government's investigation failed to reasonably follow

up on or failed to refute (1) plausible explanations advanced by the Defendant, or

(2) explanations that otherwise arose during the investigation concerning other

assets the Defendant had at the beginning of the year, or (3) other nontaxable

sources of income the Defendant had during the year, then you should find the

Defendant not guilty.

But the Government’s obligation to reasonably investigate applies only to

suggestions or explanations made by the Defendant, or to reasonable leads that

otherwise turn up. The Government isn’t required to investigate every conceivable

asset or source of nontaxable funds.

If you decide the evidence in the case proves beyond a reasonable doubt

what was the maximum possible amount of the Defendant's net worth at the

beginning of the tax year, and proves that any increase in the Defendant's net worth

at the end of the year plus the amount of nondeductible expenditures made during

the year was much more t han the amount of income reported on the Defendant's

tax return for that year, you must then decide whether the evidence also proves

beyond a reasonable doubt that the additional funds are taxable income that the

Defendant willfully attempted to evade paying taxes on.