Before MCLAUGHLIN and HASTIE, Circuit Judges, and MORRILL, District Judge.
Tax deficiencies, fraud penalties and underestimation penalties were assessed against petitioner Albert N. Shahadi for the years 1944-1949 inclusive and against him and his wife, Josephine, for the year 1950. Appeals heard by the Tax Court as a consolidated group resulted in the Commissioner being sustained and the petitioners are now before us in a consolidated review after a denial by the Tax Court of their motion for reconsideration.
The deficiencies and additions amounted to $74,599.29 as follows:
Year Deficiency Additions to Tax Sec. 29 Sec. 294(d) (Underestimation)
1944 $4,472.04 $2,236.02 $None
1945 9,757.73 4,878.87 658.98
1946 7,052.82 3,526.41 423.17
1947 4,679.09 2,339.55 210.77
1948 5,464.99 2,732.50 341.21
1949 15,005.87 7,502.94 974.97
(Joint) 1,461.34 730.67 86.51
On the basis of a net worth computation, it was found that there was a failure to report income during 19441950 inclusive in the amount of $102,277.74.
The principal questions are: Was the use of the net worth method justified under § 41*fn1 of the Internal Revenue Code of 1939?*fn2 Did the evidence justify the finding of deficiencies? Were the deficiencies due to "fraud ...