C. Richard Roose, Jr. and Betty B. Roose - Page 3

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          petitioners completed a 3-month bookkeeping class directed solely           
          at learning an accounting system for use in a drugstore setting.            
               Mr. Roose owned and operated Roose Drug Store (the store) as           
          a cash basis sole proprietorship during the years in issue.  He             
          worked 60 to 70 hours per week in the store, and Mrs. Roose                 
          worked 20 to 30 hours per week.                                             
               Petitioners shared the accounting and bookkeeping                      
          responsibilities of the store.  The store used a single-entry               
          accounting system known as "Drug Topics", created especially for            
          use by drugstores.  At the end of a typical day, Mr. Roose would            
          close out one of the two cash registers in the store.  The totals           
          from the first register would be entered in the other cash                  
          register.  The second register would then be closed out,                    
          reflecting all of the day's activities.  Mr. Roose used the                 
          information from this cash register tape to prepare the Daily               
          Cash Report.  The Daily Cash Report is a form containing various            
          blanks to be filled in with information from the cash register              
          tape.  Various items were represented on the Daily Cash Report,             
          including "Received on Account", "Cash Paid Out", and five                  
          categories of "Cash Sales".  Mr. Roose generally recorded all of            
          the sales under "Cash Sales (I)" and the amounts received on                
          account through in-person payments under "Cash Sales (II)".  The            
          "Received on Account" blank on the Daily Cash Report form was not           

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Last modified: May 25, 2011