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records existed at one time showing who received the funds from
Mr. Clawson, petitioner destroyed these records.
OPINION
Respondent determined that petitioner had increased
advertising and food-show income in 1989 of $343,470 and
$162,370, respectively, and increased advertising and food-show
income in 1990 of $281,409 and $255,509, respectively.
Issue 1. Advertising Income
In regard to respondent's 1989 and 1990 advertising income
determinations, the $343,470 and the $281,410 represent the
balance of the promotional accounts at the end of each year in
issue.5 By including only the balance of the promotional account
in petitioner's income, respondent in effect determined that the
promotional account payments constituted gross income and the
promotional account disbursements were allowable deductions.
Petitioner asserts that it held the promotional account funds as
a nontaxable intermediary between the vendors and the member
stores, and therefore no amount of the promotional account funds
should be includable in its income for either 1989 or 1990.6
5 For 1990, petitioner's yearend balance in the promotional
accounts was $624,880; however, in her determination, respondent
treated the excess of the yearend balance less the prior yearend
balance ($343,470) as taxable income of $281,410.
6 Since vendors withdrew $74,700 and $112,025 from the
promotional accounts for the 1989 and 1990 food shows,
(continued...)
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