Lxtteeton, Judge,
delivered the opinion of the court:
The plaintiffs sue to recover $29,439.33, representing income tax deficiency, negligence penalty and interest thereon, for the calendar year 1948, and $269.16, with interest thereon, which sum represents a conceded overpayment for the calendar year 1950. The law governing the case and the basic facts are set forth in the decision rendered by the court on October 4, 1955, 133 C. Cls. 123. The court held in that decision that there was no evidence supporting defendant’s [304]*304beginning cash on hand in its net worth statement and that plaintiff’s evidence failed to furnish a basis for entering judgment in its behalf. The case was remanded to a commissioner of this court for the purpose of taking the testimony of agent Kennedy relative to the cash on hand as of December 31,1942, and as of December 31,1947, and to have his net worth statement put in evidence for the purpose of determining the cash on hand on January 1,1948, and for a report thereon.
The testimony of Agent Kennedy was taken and the net worth statement used by him in examining plaintiffs’ returns for the years 1942 through 1947 was put in evidence. The evidence shows that the net worth statement used by agent Kennedy was prepared and given to him by plaintiffs’ attorney. This statement furnished by plaintiffs shows $50,000 cash on hand on December 31,1942, and $40,000 cash on hand on December 31, 1947. The net worth statement of Agent Thomas shows $50,000 cash on hand on December 31, 1942, and $19,211.39 cash on hand on December 31, 1947. The evidence shows that the difference between the $40,000 cash on hand as of December 31, 1947, as shown by Agent Kennedy’s net worth statement and the cash-on-hand figure of $19,211.39 as of January 1, 1948, as shown on the net worth statement by Agent Thomas, was the result of an error made by plaintiffs in the net worth statement furnished Agent Kennedy concerning loans made to one of plaintiffs’ businesses. When this error is corrected the net worth statements are not inconsistent.
The plaintiffs still contend that the defendant’s use of the net worth method was arbitrary and that its determination that plaintiffs had $50,000 cash on hand on December 31, 1942, and $19,211.39 cash on hand on January 1, 1948, are arbitrary and not supported by the record.
However, the commissioner of this court* who heard the evidence and observed the demeanor of the witnesses, is made the judge of questions of fact and his findings are presumed to be correct. The commissioner has found in finding 10 that:
Defendant’s use of the figure of $50,000 cash on hand December 31,1942, is supported by the evidence as reasonable under the circumstances described. The figure [305]*305of $40,000 cash on hand December 31, 1947, is not supported by the evidence. Defendant’s recomputation of the estimated cash on hand as of the latter date and use of the net worth method is supported by the evidence and is not arbitrary.
After an examination of the record, we agree with and adopt his finding. The element of closeness involved in this case is primarily due to the failure of the plaintiffs to come forward with facts peculiarly within their knowledge to explain the discrepancies involved in the case. The plaintiffs’ other contentions have been considered and found to be without merit.
Plaintiffs are not entitled to recover for the year 1948.
Plaintiffs are entitled to recover the conceded overpayment for 1950 in the amount of $269.16.
Judgment will be entered for plaintiffs in the amount of $269.16, with interest as provided by law.
It is so ordered.
Laramore, Judge; Madden, Judge; Whrtaeer, Judge; and Jones, Chief Judge, concur.
FINDINGS OF FACT
The court, having considered the evidence, the briefs and argument of counsel, and the supplemental report of Commissioner Marion T. Bennett, makes the following findings of fact:
1. Mr. E. Russell Kennedy, Jr., special agent for the Inr telligence Division, Internal Revenue Service, began a preliminary inspection in late 1948 of the Federal income tax returns filed by plaintiffs for the years 1943 through 1947. This inspection was made to determine whether there were any indications of criminal fraud which would justify the institution of an investigation by the Intelligence Division. Plaintiff’s counsel delivered to the special agent certain books and records of the plaintiffs which were examined along with the income tax returns. It is not now known which books and records were examined. Plaintiffs’ counsel, at the request of the special agent, also submitted a net worth statement.
2. The net worth statement, which was furnished early in 1949 to defendant, covered the years 1943 through 1947. [306]*306The special agent examined this statement, and the available records and returns, and discussed the same with plaintiffs’ counsel over a period of several months. He discovered nothing which he felt would justify the institution of a full-scale criminal fraud investigation and, accordingly, terminated his inquiries.
3. The net worth statement referred to above disclosed that as of December 31,1942, the plaintiffs had cash on hand of $50,000 and on December 31, 1947, had cash on hand of $40,000. The $50,000 cash-on-hand figure had an appreciable bearing upon the special agent’s determination that no criminal fraud investigation should be commenced. In his view, if the plaintiffs did not have $50,000 cash on hand as of December 31, 1942, their income for the ensuing five years would have been $50,000 more than was shown by the net worth statement supplied by their counsel. If, on the other hand, they had more than $50,000 cash on hand on December 31, 1942, their income would have been less than that reflected by the net worth statement for the ensuing five years.
4. The special agent had no personal knowledge of what cash on hand plaintiffs had and made no independent examination for the purpose of determining it, other than by comparing the suggested figures with the returns and the plaintiffs’ records and discussing the situation with their counsel on several occasions. Such comparison and discussion did not invalidate the cash-on-hand figures for the purposes for which the special agent was making an investigation.
5. A detailed net worth statement was attached to the deficiency notice of March 6,1952, relating to plaintiffs’ taxable income for the years 1948, 1949, and 1950, started as of December 31, 1942, and was prepared to a large extent from the figures appearing on the original net worth statement which had been given to the special agent by plaintiffs’ attorney early in 1949. This second net worth statement was prepared by Special Agent Charles E. Thomas who made no independent redetermination of the December 31, 1942, cash-on-hand figure. Agent Thomas used the same assets and liabilities and although his net worth statement was [307]*307more detailed than the one supplied by plaintiffs’ counsel in 1949, both statements reflected items which were substantially the same for each of the years 1942 through 1946.
6. During the year ended December 31,1947, the base year for purposes of determining plaintiffs’ taxable income for the years 1948, 1949, and 1960, the investigation of Agent Thomas disclosed that Mr. Meyers had loaned sums totaling $54,516.40 to Quonset Inn, Inc.
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Lxtteeton, Judge,
delivered the opinion of the court:
The plaintiffs sue to recover $29,439.33, representing income tax deficiency, negligence penalty and interest thereon, for the calendar year 1948, and $269.16, with interest thereon, which sum represents a conceded overpayment for the calendar year 1950. The law governing the case and the basic facts are set forth in the decision rendered by the court on October 4, 1955, 133 C. Cls. 123. The court held in that decision that there was no evidence supporting defendant’s [304]*304beginning cash on hand in its net worth statement and that plaintiff’s evidence failed to furnish a basis for entering judgment in its behalf. The case was remanded to a commissioner of this court for the purpose of taking the testimony of agent Kennedy relative to the cash on hand as of December 31,1942, and as of December 31,1947, and to have his net worth statement put in evidence for the purpose of determining the cash on hand on January 1,1948, and for a report thereon.
The testimony of Agent Kennedy was taken and the net worth statement used by him in examining plaintiffs’ returns for the years 1942 through 1947 was put in evidence. The evidence shows that the net worth statement used by agent Kennedy was prepared and given to him by plaintiffs’ attorney. This statement furnished by plaintiffs shows $50,000 cash on hand on December 31,1942, and $40,000 cash on hand on December 31, 1947. The net worth statement of Agent Thomas shows $50,000 cash on hand on December 31, 1942, and $19,211.39 cash on hand on December 31, 1947. The evidence shows that the difference between the $40,000 cash on hand as of December 31, 1947, as shown by Agent Kennedy’s net worth statement and the cash-on-hand figure of $19,211.39 as of January 1, 1948, as shown on the net worth statement by Agent Thomas, was the result of an error made by plaintiffs in the net worth statement furnished Agent Kennedy concerning loans made to one of plaintiffs’ businesses. When this error is corrected the net worth statements are not inconsistent.
The plaintiffs still contend that the defendant’s use of the net worth method was arbitrary and that its determination that plaintiffs had $50,000 cash on hand on December 31, 1942, and $19,211.39 cash on hand on January 1, 1948, are arbitrary and not supported by the record.
However, the commissioner of this court* who heard the evidence and observed the demeanor of the witnesses, is made the judge of questions of fact and his findings are presumed to be correct. The commissioner has found in finding 10 that:
Defendant’s use of the figure of $50,000 cash on hand December 31,1942, is supported by the evidence as reasonable under the circumstances described. The figure [305]*305of $40,000 cash on hand December 31, 1947, is not supported by the evidence. Defendant’s recomputation of the estimated cash on hand as of the latter date and use of the net worth method is supported by the evidence and is not arbitrary.
After an examination of the record, we agree with and adopt his finding. The element of closeness involved in this case is primarily due to the failure of the plaintiffs to come forward with facts peculiarly within their knowledge to explain the discrepancies involved in the case. The plaintiffs’ other contentions have been considered and found to be without merit.
Plaintiffs are not entitled to recover for the year 1948.
Plaintiffs are entitled to recover the conceded overpayment for 1950 in the amount of $269.16.
Judgment will be entered for plaintiffs in the amount of $269.16, with interest as provided by law.
It is so ordered.
Laramore, Judge; Madden, Judge; Whrtaeer, Judge; and Jones, Chief Judge, concur.
FINDINGS OF FACT
The court, having considered the evidence, the briefs and argument of counsel, and the supplemental report of Commissioner Marion T. Bennett, makes the following findings of fact:
1. Mr. E. Russell Kennedy, Jr., special agent for the Inr telligence Division, Internal Revenue Service, began a preliminary inspection in late 1948 of the Federal income tax returns filed by plaintiffs for the years 1943 through 1947. This inspection was made to determine whether there were any indications of criminal fraud which would justify the institution of an investigation by the Intelligence Division. Plaintiff’s counsel delivered to the special agent certain books and records of the plaintiffs which were examined along with the income tax returns. It is not now known which books and records were examined. Plaintiffs’ counsel, at the request of the special agent, also submitted a net worth statement.
2. The net worth statement, which was furnished early in 1949 to defendant, covered the years 1943 through 1947. [306]*306The special agent examined this statement, and the available records and returns, and discussed the same with plaintiffs’ counsel over a period of several months. He discovered nothing which he felt would justify the institution of a full-scale criminal fraud investigation and, accordingly, terminated his inquiries.
3. The net worth statement referred to above disclosed that as of December 31,1942, the plaintiffs had cash on hand of $50,000 and on December 31, 1947, had cash on hand of $40,000. The $50,000 cash-on-hand figure had an appreciable bearing upon the special agent’s determination that no criminal fraud investigation should be commenced. In his view, if the plaintiffs did not have $50,000 cash on hand as of December 31, 1942, their income for the ensuing five years would have been $50,000 more than was shown by the net worth statement supplied by their counsel. If, on the other hand, they had more than $50,000 cash on hand on December 31, 1942, their income would have been less than that reflected by the net worth statement for the ensuing five years.
4. The special agent had no personal knowledge of what cash on hand plaintiffs had and made no independent examination for the purpose of determining it, other than by comparing the suggested figures with the returns and the plaintiffs’ records and discussing the situation with their counsel on several occasions. Such comparison and discussion did not invalidate the cash-on-hand figures for the purposes for which the special agent was making an investigation.
5. A detailed net worth statement was attached to the deficiency notice of March 6,1952, relating to plaintiffs’ taxable income for the years 1948, 1949, and 1950, started as of December 31, 1942, and was prepared to a large extent from the figures appearing on the original net worth statement which had been given to the special agent by plaintiffs’ attorney early in 1949. This second net worth statement was prepared by Special Agent Charles E. Thomas who made no independent redetermination of the December 31, 1942, cash-on-hand figure. Agent Thomas used the same assets and liabilities and although his net worth statement was [307]*307more detailed than the one supplied by plaintiffs’ counsel in 1949, both statements reflected items which were substantially the same for each of the years 1942 through 1946.
6. During the year ended December 31,1947, the base year for purposes of determining plaintiffs’ taxable income for the years 1948, 1949, and 1960, the investigation of Agent Thomas disclosed that Mr. Meyers had loaned sums totaling $54,516.40 to Quonset Inn, Inc. This sum is stipulated. During the previous year the sum of $49,100 was loaned to Quonset Inn, Inc. The 1949 net worth statement used by Agent Kennedy and plaintiffs’ counsel refers to loans receivable of $43,676.40 in 1947. This item was in error on the 1949 net worth statement because it was understated by the sum of $46,940. Agent Thomas ascertained that the total loans made by Meyers to Quonset Inn, Inc., were as shown on the 1949 net worth statement for 1946 in the sum of $49,100. However, for 1947 it was found that the correct total sum loaned was $90,616.40. This sum was carried as “Loans Receivable Quonset Inn, Inc.,” by Agent Thomas in his own statement of plaintiffs’ net worth. Both the statement of Thomas and the one used by Kennedy and plaintiffs’ counsel prepared in 1949 show a Quonset Inn loan of $13,000 in 1947. Both net worth statements described the latter as a note receivable.
7. Agent Thomas included the omission described above in his detailed net worth statement before adjusting the plaintiffs’ cash on hand based upon the income tax return filed for the year 1947. Upon the correction of the omission relating to the amount of cash loaned during 1947 to Quonset Inn, Inc., the plaintiffs’ net worth statement supplied in 1949 would show, and the detailed net worth statement made by Agent Thomas did show, a decrease in the available cash on hand as of December 31,1947, from the sum of $40,000 first determined to the sum of $19,211.39. This action had the effect of increasing plaintiffs’ income tax liability for 1948.
8. Agent Thomas requested that the plaintiffs and their counsel supply him with plaintiffs’ books and records for the years 1948,1949, and 1950. No cancelled checks or any other evidence of the plaintiffs’ personal expenditures were made available. In these circumstances the agent secured tran[308]*308scripts of checks clearing plaintiffs’ bank accounts during 1948,1949, and 1950, totaled the amounts shown to have been spent by plaintiffs, deducted from the total the amount of checks which he assumed were for business or other deductible expenses such as interest and taxes, and included the difference in his detailed net worth statement as “Personal Checks, Mrs. Meyers” and “Personal Checks, Mr. Meyers.” No personal checks were listed on the detailed net worth statement for Mr. Meyers for the year 1948.
9. The plaintiffs, Mr. Meyers in particular, operated on a cash basis and at the end of each of the years 1948,1949, and 1950 Mr. Meyers maintained a net bank account balance of under $100. Therefore, Agent Thomas included in his net worth statement an item, “Estimated Cash Personal Expense.” The second net worth statement used the $4,000 estimate of personal expense for 1947, set forth in the original net worth statement. For 1948 when no personal checks were charged back for Mr. Meyers, the sum of $2,000 was charged back as a cash personal expense. The sum of $4,500 was charged back to him for 1949 and $7,000 for 1950. It is not shown by the evidence how these sums were determined since the agent did not remember when he testified at the trial of the case. The same is true with respect to the amounts charged back to Mrs. Meyers. Plaintiffs challenge these items as arbitrary and excessive and as depressing refunds claimed due. These assertions were not made by plaintiffs in their refund claims. The refund claim for 1949 has been allowed and paid. Only 1948 and 1950 are in issue here. Overpayment of the sum of $269.16 for 1950 is conceded by the defendant. As to 1950 it is found plaintiffs purchased a Cadillac automobile. There is no evidence that it was paid for other than by cash except that a trade-in of undetermined value was involved. The sum of $500 which was added to plaintiffs’ income in 1950 represented payment of an appraisal fee in connection with condemnation proceedings, the gain on which was reflected by plaintiffs in their income tax returns for 1950. There is no evidence that this fact was called to the attention of the revenue agents.
10. Defendant’s use of the figure of $50,000 cash on hand December 31,1942, is supported by the evidence as reasonable [309]*309under the circumstances described. The figure of $40,000 cash on hand December 31,1947, is not supported by the evidence. Defendant’s recomputation of the estimated cash on hand as of the latter date and use of the net worth method is supported by the evidence and is not arbitrary.
CONCLUSION OP LAW
Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes as a matter of law that the plaintiffs are entitled to recover, and it is therefore adjudged and ordered that they recover of and from the United States two hundred sixty-nine dollars and sixteen cents ($269.16).