CALCRIM No. 2844. Determining Income: Cash Expenditures Method

Judicial Council of California Criminal Jury Instructions (2023 edition)

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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

People must also prove that: (1) the defendant had one or more sources

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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,

C. Whether the People have proved that any nondeductible

TAX CRIMES CALCRIM No. 2844

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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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Page last reviewed May 2023