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provided her inventory did not substantially lose its value.5
However, petitioner asserts that at the end of 1994 there was
only a balance of $150 in inventory.6 Petitioner made no attempt
to substantiate her beginning and ending inventory figures. We
do not find petitioner's calculations of cost of goods sold to be
reliable, because beginning and ending inventory figures were not
supported by evidence. Consequently, petitioner may not reduce
her gross receipts by any amount in excess of that determined by
respondent in the notices of deficiency.
In the notices of deficiency for the taxable years 1993 and
1994, respondent disallowed various expenses related to
petitioner's wholesale and consulting activities. Respondent
determined that petitioner did not meet her burden of proof that
these expenses were actually incurred.
5This can be demonstrated by the following calculation:
Beginning inventory 1993 $2,450
Purchases 1993 and 1994 6,313
Amount sold (at cost) (2,000)
Ending inventory 1994 $6,763 (projected)
This also assumes, though we do not decide, that
petitioner's reported amount for beginning inventory was correct.
6At trial, petitioner's accountant testified that items sold
by petitioner were all sold to various customers at a price from
$2 to $10 greater than her cost for the items. If petitioner did
sell the inventory at some level of markup, we note that the
ending inventory figure would be higher.
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