2843. Determining Income: Bank Deposits Method
In this case, the People are [also] using what is called the bank deposits method to try to prove that the defendant had unreported taxable income. I will now explain the bank deposits method.
If the People prove that: (a) the defendant engaged in an activity that produced taxable income, (b) the defendant periodically deposited money in bank accounts in (his/her) name or under (his/her) control, and (c) the money deposited did not come from nontaxable sources, then you may but are not required to conclude that these bank deposits are taxable income. Nontaxable sources of the bank deposits include gifts, inheritances, loans, or redeposits or transfers of funds between accounts. 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 bank deposits method that the defendant had unreported taxable income.
In order to prove that the defendant had unreported taxable income [using the bank deposits method], the People must also prove that the defendant's total taxable bank deposits were 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 bank deposits method. If the People have proved beyond a reasonable doubt that: (1) during the year, the defendant spent money from funds not deposited in any bank 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 bank deposits method.]
In order to rely on the bank deposits method of proving taxable income, the People must prove the defendant's cash on hand at the starting point with reasonable certainty. Here the starting point is January 1, <insert year alleged>. Cash on hand is cash that the defendant had in (his/her) possession at the starting point that was not in a bank account. The People do not need to show the exact amount of the cash on hand at the starting point, but the People's claimed cash-on-hand figure must be reasonably certain.
In deciding whether the claimed cash-on-hand figure 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 cash on hand at the beginning of <insert year alleged> to a reasonable degree of certainty,
C. Whether the People have proved that the defendant's total bank deposits, together with any nondeductible expenditures the defendant made during the year, were substantially more than the income that the defendant reported on (his/her) tax return for <insert year alleged>, then you must find that the People have not proved under the bank deposits 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] ].]
If the prosecution is relying on the bank deposits method, the court has a sua sponte duty to give this instruction. (See Holland v. United States (1954) 348 U.S. 121, 129 [75 S.Ct. 127, 99 L.Ed. 150]; United States v. Hall (9th Cir. 1981) 650 F.2d 994, 999.)
The court must also give the appropriate instruction on the elements of the offense charged.
Give the bracketed sentence that begins with "If, on the other hand, you conclude" in every case, unless the court is giving CALCRIM No. 2846, Proof of Unreported Taxable Income: Must Still Prove Elements of Offense.
Bank Deposits Method Explained. United States v. Hall (9th Cir. 1981) 650 F.2d 994, 997, fn. 4; see also Pattern Jury Instructions of the District Judges Association of the Eleventh Circuit, Offense Instruction No. 93.3 (2003); Federal Jury Practice and Instructions, Criminal (5th ed.) § 67.07.
Sua Sponte Duty to Instruct on Method. United States v. Hall (9th Cir. 1981) 650 F.2d 994, 999.
Requirements for Proof. United States v. Conaway (5th Cir. 1993) 11 F.3d 40, 43-44; United States v. Abodeely (8th Cir. 1986) 801 F.2d 1020, 1024; United States v. Boulet (5th Cir. 1978) 577 F.2d 1165, 1167.
(New January 2006)