225 F.2d 874
55-1 USTC P 9506
Michael F. DRINKHOUSE, Petitioner-Appellant,
COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.
No. 262, Docket 23465.
United States Court of Appeals, Second Circuit.
Argued May 13, 1955.
Decided June 8, 1955.
Victor R. Wolder, New York City, for petitioner.
H. Brian Holland, Ellis N. Slack and Morton K. Rothschild, Washington, D.C., for respondent.
Before L. HAND, SWAN and FRANK, Circuit Judges.
FRANK, Circuit Judge.
1. The Tax Court heard irreconcilable testimony on the question of whether the $10,000 belonged to Drinkhouse. Drinkhouse testified that, at the December 4th meeting in Miss Barkow's apartment, she gave him the money to be deposited in her account. Miss Barkow emphatically denied having given him any funds, and her account of the December 4th episode was corroborated by the testimony of one Bessie Cushenberry who had been present at the time. Reasonable inferences from additional facts support Miss Barkow's version. Thus, for example, she was an experienced and successful manufacturer of costume jewelry, accustomed to daily deposits of funds, and was most unlikely to carry about $10,000 in cash or to choose so unorthodox a method of depositing as Drinkhouse's testimony suggests. Moreover, the checks lacked a teller's stamp, an endorsement, or any other identifying makr by which the check could be traced to the payee. So unusual a departure from the banking norm is perhaps consistent with Drinkhouse's long professional and personal friendship with several of the bank's principal officers, and with his persuasion of Miss Barkow to open an account at that bank. In all of these circumstances, we cannot say that the Tax Court erred in believing Miss Barkow and her corroborator, and in disbelieving Drinkhouse.
2. Drinkhouse contends that, whether or not the $10,000 was his, it was not income to him. Concededly, proof of bank deposits, standing alone, does not establish the receipt of income. But many other circumstances may create the same inference. Here Drinkhouse, on two days, deposits $10,000 in bills of denominations from $1 to $50; as a restaurateur, he would customarily be in receipt of income in small bills. He had already prepared for the immediate withdrawal of the funds by checks partially filled out by him. His books and records fail to reveal any outstanding debts, loans, or other likely source for the $10,000. He failed, in his testimony at the trial, or at any other time, to suggest any credible explanation of the source of the funds or the purpose of depositing them. In these circumstances, the inference of income, if not compelling, is surely permissible. See Hague Estate v. Commissioner, 2 Cir., 132 F.2d 775; Halle v. Commissioner, 2 Cir., 175 F.2d 500.