California Criminal Jury Instructions (CALCRIM) (2017)

2844. Determining Income: Cash Expenditures Method

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2844.Determining Income: Cash Expenditures Method
In this case, the People are [also] using the cash expenditures method to
try to prove that the defendant had unreported taxable income. I will
now explain the cash expenditures method.
The cash expenditures method involves an examination of money the
defendant spent during the taxable year along with (his/her) net worth
at the beginning and at the end of that year.
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 acquired, not its current market value.
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.
The People must also prove that the money or property was taxable
income. In order do so, the People must prove that: (a) the defendant
had one or more sources of taxable income, and (b) 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 you have a reasonable doubt about whether the People have
proved any of these factors, you must find that the People have not
proved under the cash expenditures method that the defendant had
unreported taxable income.
In order to prove that the defendant had unreported taxable income
[using the cash expenditures method], the People must prove that the
defendant’s cash expenditures establish taxable income that was
substantially greater than the income that (he/she) 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 cash expenditures method. 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
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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. 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 the 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 may
not take any increase in the defendant’s net worth into account in
applying the cash expenditures method.]
In order to rely on an increase in the defendant’s net worth to prove
unreported taxable income under the cash expenditures method, 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 defendant owned at the starting point.
However, the People must prove beyond a reasonable doubt that all the
assets defendant owned at the starting point were not enough to account
for any proven increase in the defendant’s 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 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
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C. Whether the People have proved that any nondeductible
expenditures the defendant made during the year, together with
any increase in the defendant’s net worth, 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 cash
expenditures 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
BENCH NOTES
Instructional Duty
If the prosecution is relying on the cash expenditures 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, 998.)
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.
AUTHORITY
• Cash Expenditures Method Explained. United States v. Caswell (8th Cir. 1987)
825 F.2d 1228, 1231–1232; see also Pattern Jury Instructions of the District
Judges Association of the Eleventh Circuit, Offense Instruction No. 93.4 (2003);
Federal Jury Practice and Instructions, Criminal (5th ed.) § 67.07.
• Sua Sponte Duty to Instruct on Method. See Holland v. United States (1954)
348 U.S. 121, 129 [75 S.Ct. 127, 99 L.Ed. 150]; United States v. Hall (1981)
650 F.2d 994, 998.
• Requirements for Proof. United States v. Caswell (8th Cir. 1987) 825 F.2d
1228, 1231–1232; United States v. Citron (2d Cir. 1986) 783 F.2d 307,
315–316; Taglianetti v. United States (1st Cir. 1968) 398 F.2d 558, 562–563,
565.
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