The taxpayer reported the income received over the purchase price of the land contract as a capital gain rather than ordinary income. Except for a proration which he allowed for the interest received, the taxpayer did not report his income from payments on the land contracts at the time it was received, but waited until the year when he had totally recovered his cost before reporting any gain. The government assessed deficiencies on the premise that the gain should have been reported as ordinary income and should not have been deferred. Taxpayer paid the tax deficiencies, penalties and interest assessed for the eleven years in question. In August 1961 he brought this action in the District Court to recover his alleged overpayment.

The case was submitted to a jury for determination of the issue of fraud for the taxable years 1948 to 1958. The court reserved for its own decision the remaining questions of law and fact involved.2

The trial court found generally against the taxpayer as to the deficiencies involved; it held that the income received under the land contract transactions was ordinary income and could not be treated as a capital gain under 1212 and 1221 of the Internal Revenue Code of 1954; that the recovery of the costs was not speculative and appellant should have reported his income proportionately at the time that it was received; and that the government was justified in employing the net worth system to determine taxpayer's income during the period in question. The jury determined that the taxpayer was guilty of fraud for each of the eleven years. The trial court, however, sustained taxpayer's motion for judgment notwithstanding the verdict on the issue of fraud for the years 1955 through 1958, because of an improper application of the net worth method to those years.3 Appellant was therefore granted refund only as to the fraud penalty from 1955 through 1958. Taxpayer appeals. We affirm.

The parties are in basic agreement as to the issues presented on this appeal. They are as follows:

1. Whether the amount received by taxpayer above costs on land contract transactions should have been reported as ordinary income rather than as capital gain.

2. Whether taxpayer should have allocated a proportionate part of each payment on the land contracts to income and a part to recovery of cost in the year received.

3. Whether the Internal Revenue Service should have been permitted to use the net worth method of reconstructing taxpayer's income.4

4. Whether the District Court erred in submitting the issue of fraud to the jury.

Appellant claims that the property he held by his land contract transactions meets the definition of a capital asset in Tit. 26 U.S.C.A. 1221. Argument is made that he was purchasing an interest in real estate, holding it for six months or more as an investment and that therefore his income on the transaction should be entitled to 'capital gains treatment.' Overlooked is the doctrine of equitable conversion applicable in Nebraska. In Buford v. Dahlke, 158 Neb. 39, 62 N.W.2d 252, at 254-255, it was stated:

'It has been frequently and consistently decided by this court, as it is quite unanimously agreed by courts generally, that if the owner of real estate enters into a contract of sale whereby the purchaser agrees to buy and the owner agrees to sell it and the vendor retains the legal title until the purchase money or some part of it is paid, the ownership of the real estate as such passes to and vests in the purchaser, and that from the date of the contract the vendor holds the legal title as security for a debt as trustee for the purchaser. The interest or estate acquired by the vendee is land and the rights conferred by the contract upon and vested in the vendor are personal property.'

Under Nebraska law it is clear that all the vendor of a land contract could transfer to a third person-- the taxpayer in this instance-- was personal property. The legal title retained by the vendor is merely a form of security. See also In re Wiley's Estate, 150 Neb. 898, 36 N.W. 483, opinion supplemented on other grounds, 151 Neb. 633, 38 N.W.2d 434; United States v. Sode, 93 F. Supp. 398 (D.Neb.1950).

In Arthur E. Wood, 25 T.C. 468 (1955), the Tax Court was faced with the same type of transaction. The court acknowledge the doctrine of equitable conversion under the law of Michigan. As to the assignee of the land contract who claimed a long term capital gain, the court said:

'The profits derived by petitioner from such contracts were realized simply by holding the contracts until maturity, meanwhile collecting the periodic payments from the purchaser of the property. Petitioner merely collected the proceeds of assigned claims. * * * It is well settled that gain resulting from the collection of a claim or chose in action is taxable as ordinary income. * * * Petitioner appears to be in the same economic position as a bondholder who realizes gain from the recovery of discount on bonds purchased for less than their face amount.' 25 T.C. 476-477.

See also Darby Investment Corp., 37 T.C. 839, 843 (1962), aff'd 315 F.2d 551 (6 Cir. 1963), wherein the parties conceded in a similar transaction that the 'discount income' received was ordinary income, not capital gain. Compare United States v. Midland-Ross Corp., 381 U.S. 54, 85 S. Ct. 1308, 14 L. Ed. 2d 214 (1965). We therefore conclude that taxpayer was not entitled to a refund based upon a capital gain computation.

Appellant's second contention is that the gain, whether treated as a capital gain or as ordinary income, is not realized until the taxpayer has completely recovered his cost, relying upon Burnet v. Logan, 283 U.S. 404, 51 S. Ct. 550, 75 L. Ed. 1143 (1931). The identical argument was offered and rejected in Darby Investment Corp., supra. The court in Darby submits that:

'Determination of the issue turns on the question of whether the investment in the contracts is of such a speculative nature that the purchaser, the petitioner herein, cannot be reasonably certain of ever recovering his cost.' 315 F.2d at 552.

This test was properly recognized by the trial court below. The court found under the evidence that these investments were not speculative and therefore a proportionate part of the payments should have been assigned to income.

The evidence demonstrates that while there was some degree of uncertainty whether any one vendee would complete payments on his contract, the numerous and substantial safeguards against loss erected by Ehlers more than counter-balanced this factor. The evidence showed taxpayer systematically screened the contracts offered him, accepting only around 25 per cent, inspected and appraised the property involved for actual market value, checked the credit of the purchasers who would become his payors, obtained in almost all cases a first lien on the property, and never paid more than what he believed to be the actual market value of the property (sometimes only 50 per cent of the remaining balance on the contract). Due to these factors, along with the provision that in event of default he had the right to foreclose and claim the property without returning prior payments, Ehlers sustained losses on only about twelve of his 300 to 400 land contract transactions.

There exists substantial evidence which supports the findings of the District Court. See Fed.R.Civ.P. 52(a). We sustain the lower court's finding that the taxpayer should have allocated a portion of each payment on the land contracts to income for the year in which it was received.5

Appellant complains of the use of the net worth method for determining the extent of his deficiencies and alleged fraud for the years 1948 through 1958. First, it is argued before the net worth system can be used to reconstruct income the government must show either that taxpayer failed to have any bookkeeping system or that an inadequate method was employed. The fallacy of this argument was fully demonstrated by the trial court,6 relying upon Holland v. United States, 348 U.S. 121, 75 S. Ct. 127, 99 L. Ed. 150 (1954). The observation of the Court of Appeals for the Seventh Circuit is appropriate here:

'The fact that the taxpayer's books and other records are consistent with his income tax returns or are internally consistent proves nothing more than that they are consistent; it does not establish that they are truthful or accurate. * * * The Holland decision makes it clear that there are no conditions precedent to the utilization of the net worth technique.' Davis v. Commissioner of Internal Revenue, 239 F.2d 187, at 189 (7 Cir. 1956).

Secondly, appellant contends that the government must indicate a likely source for the additional income before the net worth computations can be used. This position is not tenable in light of the specific holding in United States v. Massei, 355 U.S. 595, 78 S. Ct. 495, 2 L. Ed. 2d 517 (1958). As the lower court indicated, 'all that is required in this respect is a negation of nontaxable sources of income such as gifts, windfalls, money hoards, or the like.' See also Commissioner of Internal Revenue v. Thomas, 261 F.2d 643 (1 Cir. 1958); Ferris v. Commissioner of Internal Revenue, 317 F.2d 333, 334 (2 Cir. 1963); Gatling v. Commissioner of Internal Revenue, 286 F.2d 139, 144-145 (4 Cir. 1961). The evidence clearly supports this negation. See also Albert N. Shahadi, 29 T.C. 1157 (1958), holding it is sufficient if the government negates as possible sources of unreported increases in net worth all those nontaxable sources indicated by taxpayer.

There are many weaknesses in the utilization of the net worth method to reconstruct a taxpayer's income. It is frequently recognized that potential error can arise. See e.g., Holland v. United States, supra, 348 U.S. at 127-129, 75 S. Ct. 131-132; Schwab, The Civil Aspects of the Net Worth Method, 3 Wm. & Mary L.Rev. 65 at 97 (1961). However, these possible abuses open vistas of rebuttal evidence to the taxpayer in an adversary proceeding. Proof of other sources of income, such as income from nontaxable securities,7 possible appreciation of property values over a period of years, and possible inaccuracies in the calculations of the net worth (see Friedberg v. United States, 348 U.S. 142, 75 S. Ct. 138, 99 L. Ed. 188 (1954)) are all available as avenues of evidential proof by the taxpayer. None of these explanations appear of record.8 In fact, to the contrary, appellant agreed to the general accuracy of the opening and closing net worth statements, personally negated other means of income, offered no explanation of his increased net worth9 and in no way suggested the increase arose from nontaxable income or appreciation of value. And, despite appellant's counsel's claim that the beginning net worth figure is not accurate, slighted is the fact that appellant's trial counsel basically stipulated to the same in pretrial proceedings. The applicable rule is that parties are bound by stipulations voluntarily made and that relief from such stipulations after judgment is warranted only under exceptional circumstances. See Farmers Co-operative Elevator Assoc., etc. v. Strand, 382 F.2d 224, decided July 25, (8 Cir. 1967).

Of significance is Chief Judge Robinson's statements:

'since there appears to be no dispute as to the method of preparing the net worth statements and since we find that the evidence adequately supports the accuracy of the nethod used, we will not take time here for a detailed analysis of the ways and means of preparing the net worth statements. Suffice to say that we are satisfied that the statements are accurate within the limits that can be expected of this less than perfect method of approaching the reconstruction of income.' 253 F. Supp. at 65.

However, because of the arbitrary allocation of the net worth for the years 1955 to 1958, taxpayer's counsel moved for a directed verdict, not only for the failure of the government to prove fraud, but for the recovery of all assessments for those years as well. The trial court again showed perceptive analysis10 when he sustained the motion for judgment n.o.v. on the fraud counts for the years 1955 to 1958. It is, however, apparent that Chief Judge Robinson's critique of the 'spreading theory' as it relates to the fraud charge is in part, at least, equally applicable to the assessment of the deficiencies for the years 1955 through 1958.11 Assuming that the deficiencies were arbitrarily determined by improper allocation, and that this might be sufficient showing to sustain a taxpayer's burden of proof before the tax court,12 we face a different problem here. Appellant has a distinctly different and greater burden in a tax refund case, since he has assumed the additional responsibility of proving what the correct tax should be so that the exact amount of refund can be determined. Helvering v. Taylor, 293 U.S. 507, at 514-515, 55 S. Ct. 287, 79 L. Ed. 623 (1935); United States v. Pfister, 205 F.2d 538 (8 Cir. 1953). A tax refund suit is similar to an action for 'money had and received' and the burden is always on the taxpayer to show the exact amount the government is wrongfully holding. In a deficiency suit in the tax court, a judgment against the taxpayer would necessarily reflect the court's acceptance of the government's 'spreading' of a net worth increase over the individual years involved. But in a tax refund case before the district court, denial of relief to the taxpayer rests on the failure of proof of the exact refund due or alternatively upon the rejection of the credibility of such proof.

Where appellant does not specifically challenge upon appeal the findings of the court in denying refund for the years 1955 through 1958,13 short of plain error, we will not entertain points of law that neither side has urged or briefed. Smith v. American Guild of Variety Artists, 368 F.2d 511, at 514 (8 Cir. 1966). See also Eighth Circuit Rule 11(b).

Lastly, appellant complains of the court's instruction on fraud. Exception was specifically made to the instruction that if any uncooperativeness of taxpayer in supplying information to the revenue agents should be found, this is a circumstance which the jury should consider in determining whether or not there was fraud. A companion instruction was given that should the jury find the Ehlers had been fully cooperative, this should be considered in favor of the taxpayer. We find no merit in taxpayer's objection. The instructions must be construed as a whole.

Chief Judge Robinson correctly instructed the jury as to the meaning of fraud in income tax law in the following instruction:

"Fraud' as used in the income tax statutes, means an actual and deliberate, or wilful, wrongdoing with specific intent to evade a tax believed to be owed.'

Appellant's contention that the court 'did not restate the law to the jury' is wholly without basis in fact or law. See also Fed.R.Civ.P. 51 as to making specific exception.

Finally, appellant argues that there was no evidence of a 'scheme or pattern of wrongdoing or a specific purpose to avoid a tax known to be owing,' and that 'there is no real circumstantial evidence that he possessed the required intent which is necessary for the Court to instruct a jury on the fraud issue.' The record clearly demonstrates, in addition to evidence of a consistent pattern of under-reporting income over a period of years, frequent failures to report both down payments and installment payments on the land contracts as they came in, and the addition of expense items, e.g., taxes and insurance, to the cost of the purchase price, requiring the purchaser to make full repayment and at the same time deducting these items as expenses on his income tax returns. It may be noted that the taxpayer also failed to report correctly some of the interest income derived from his land contracts. We feel the trial court properly submitted the issue of fraud to the jury.

The judgment of the lower court is affirmed.