Apollo Overseas International, Inc. - Page 7

                                        -  -7                                           
               Petitioner paid the invoices rendered by Alexander Air,                
          including freight charges and customs duties within 2 weeks to 1            
          month.  Petitioner never failed to pay any amount owed to                   
          Alexander Air, but on occasion, if Alexander Air was short of               
          cash funds, petitioner would pay the amount of the customs duties           
          directly to the Customs Service.  Petitioner never paid customs             
          duties in excess of amounts computed by Alexander Air and shown             
          on the customs entry form.                                                  
               Petitioner on its Federal income tax return for its fiscal             
          year 1989 deducted $398,900 of "duty & custom service" and                  
          $33,318 for "freight & delivery".  For its fiscal year 1990,                
          petitioner deducted $630,135 for "duty & custom service" and                
          $53,790 for "freight & delivery".                                           
               Respondent determined in her notice of deficiency that                 
          petitioner received gross receipts in the amounts of $1,189,925,            
          $4,194,099, and $6,313,263 in lieu of $791,042, $3,739,433, and             
          $4,681,229 reported on petitioner's tax returns for its fiscal              
          years 1988, 1989, and 1990, respectively.  Respondent also                  
          determined that petitioner's costs of goods sold were in the                
          amounts of $757,582, $2,811,340, and $3,989,973, in lieu of                 
          $752,044, $3,194,122, and $3,804,065 reported on petitioner's tax           
          returns for its fiscal years 1988, 1989, and 1990, respectively.            









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