Candela appears to have had little knowledge or understanding of the tax laws. Candela had no formal education, and testified that he had no knowledge of mathematics. He kept his money in milk cans and safe deposit boxes rather than in interest bearing accounts or investments. Up until the time he acquired the cheese company he retained his barber to prepare his tax returns for five dollars. 2 He was illiterate and could not speak English very well. The record before the District Court strongly suggests that Candela lacked any business expertise outside of the operation of a cheese factory. While Filippo Candela may well have been knowledgeable about the production and sale of cheese, his acumen was limited to that field. First, the District Court concluded that Filippo Candela possessed a "high degree of business acumen" sufficient to understand his tax obligations. The Court below did rely on three "indicators" in support of the finding of fraud. Using this method the Commissioner determined that Candela's adjusted gross income for 1967 was $40,870.89 rather than the reported amount of $11,796.28 $54,421. To determine income for subsequent years, the Commissioner simply subtracts the taxpayer's net worth at the beginning of the year from the end of the year. The difference is the taxpayer's income for that year. Once the taxpayer's net worth for the beginning of the taxable period is determined, that figure is subtracted from his net worth for the following year. This is done by subtracting the value of the taxpayer's liabilities from the value of his assets. Under that method a taxpayer's net worth is established as of the beginning of the period under scrutiny. ![]() Rather, the Internal Revenue Service has employed a net worth method of determining income. In the instant case, the Commissioner does not rely on any direct evidence to establish an understatement of income for the years in question.
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