Before DUFFY, Chief Judge, and LINDLEY and HASTINGS, Circuit Judges.
This is an appeal from the Tax Court which decided that 25% of the bank deposits made by taxpayer during the years 1949, 1950 and 1951 was income, some of which had not been reported on taxpayer's returns for those years.
During the years in question, taxpayer lived in Milwaukee and derived income as a sports broker, handling and placing bets for others with bookmakers and professional bettors. In 1949 he was also in the concession business working at state fairs, carnivals and sport shows. He also did some work at race tracks in Florida.
Taxpayer regularly called on persons with whom he had previously made contact, and they would hand him funds to bet on various sports events at certain odds. If he could place the bets at better odds, he retained any extra winnings. At times he would receive gratuities from his clients after they had won bets.
Taxpayer maintained a checking account at a Milwaukee bank where he deposited funds. Some of these deposits included money which clients had turned over to him to be bet.He often kept small wagers on his person. Also, in certain instances, if the bookkeeper with whom he expected to do business was close by, he would hand him the money directly.
In 1949, taxpayer deposited $26,518.98 in his checking account. Of this amount $13,458.75 was in cash and $13,060.23 in checks. He also had a $1,000 deposit in a savings account.
In 1950, taxpayer deposited $46,194.77 in his checking account and $1,000 in his savings account. Of the sum in his checking account, over $29,000 was in cash and over $16,800 was in checks. In addition, taxpayer received checks totaling $4,870.35 which he did not deposit in his bank account.
In 1951, taxpayer deposited $19,200 in his checking account of which $10,376 was in cash and $8,824 was in checks. He also received $3,346 in checks which he did not deposit.
Deposits were made in taxpayer's checking account in all of the months during 1949, in every month except May in 1950 and in the months of January, February, March, October and November in 1951.
Taxpayer did not keep any records or books. As bets were negotiated, he made notations on scraps of paper. On Saturdays he would "figure things out," pay what was due and then throw the notations away. When the revenue agent made the investigations, taxpayer had no canceled checks. For at least one of the years in question, taxpayer used a safe deposit box which he visited about once a week.
Revenue agents requested a net worth statement which taxpayer refused to furnish. He also refused to explain the withdrawals from his account or to otherwise cooperate with the Internal Revenue agents.
The bank did not film the checks so no record of them was available. There was no pattern of withdrawals as almost all withdrawals were in cash. Department stores and credit bureaus were contacted but apparently the various cash transactions carried on by the taxpayer could not be traced.
The Commissioner resorted to the bank deposit method of reconstructing taxpayer's income. He determined deficiencies against taxpayer for the years 1949, 1950 and 1951 by adding his bank deposits and unreported checks for each year, and ...