Summary:
Cases of income tax fraud where the taxpayers told Internal Revenue Service they didn't evade taxes, but spent a cash hoard from gifts received and prior income.

If you don't have adequate records, the Internal Revenue Service will estimate your taxes. With one estimate method, the agency adds up what you spent, then says this is your income.

People don't usually challenge the amount; instead they claim some spending didn't come from income, but from a stash of cash either saved or received as gifts. Four courts looked at this excuse:

• Robert and Kathleen Asmar from Keansburg, N. J., explained that by saving gifts and
  

previously taxed wages they squirreled away $49,000. They put this in a tin box underneath his stepmother's home because they distrusted banks.

But with no witnesses and little or no evidence to support the story, the judge ruled that the IRS computations are correct. The judge sarcastically added, "This exercise in frugality is remarkable."

• George G. Howard, a farmer from Vermillion County, Ind., claimed his grandmother
  

gave him money when he was 16 -- 58 years earlier. He didn't spend it until after depleting his and his parents' assets caring for them. As a child of the depression, he learned to keep cash at home instead of trusting banks that might fail.

The government said the story didn't make sense because he lost interest income.

The court ruled for Howard and reversed the IRS. He didn't live luxuriously; he didn't even pay for his daughter's wedding, the judge said. "Though his actions were foolish, his story is credible."

• Benjamin Campfield from Trumbull, Conn., said part of his spending came from
  

$143,000 he had in a safe deposit box. The judge asked: Why did Campfield borrow $19,590 if he had this money? Why at another time did he forgo interest on this money while he had other funds earning interest? Why did he not mention this money when the agent examined his return?

Campfield didn't have $143,000, and the agent's income estimate is correct, the court ruled.

• Billy Hull resided in Deberry Correctional Institute in Nashville, Tenn., when he told the
  

IRS his story. The extra money came from his bootlegging granny. She gave it to him because he had helped her bury barrels filled with whiskey. They left them to "char" for about a year.

His grandmother remembered his help when she was in the hospital dying. The family was in the hall outside her room. "She called for me to come in, and I thought something was getting ready to happen, so I burst in there.... She said come down here close so you can hear me. So, I got down real close to her, and she kept saying I'm going to tell you where I've got everything I've got. She whispered in my ear and told me everything she had was buried. She told me where it was buried by the side of the house.... Fifteen minutes later she died." He found two gallon jars stuffed with $50,000. He also accumulated $35,000 he kept in a bank safe deposit box.

Asked why he didn't put the buried treasure in one, he replied, "Well, I sure would have to get a big safe deposit box."

The court didn't believe Hull's story. It increased his taxes and added penalties.

More at Fraud and Scams.

THE MORAL: Tell IRS you socked it away and they will sock it to you.